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ITEM 1A.RISK FACTORS

An investment in our common stock involves a high degree of risk. Prior to making a decision about investing in our securities, you should carefully consider the specific risk factors discussed below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. If any such risks actually occur, our business, financial condition, or results of operations could be materially and adversely affected. In such cases, the market price of our common stock could decline, and you may lose all or part of your investment.

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Risks Related to Our Business, Industry and Supply Chain

We have incurred losses and anticipate continued losses and negative cash flows.

We have transitioned from a research and development company to a commercial products manufacturer, services provider and developer. We have not been profitable since our year ended October 31, 1997. We expect to continue to incur net losses and generate negative cash flows until we can produce sufficient revenues and gross profit to cover our costs. We may never become profitable. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future. For the reasons discussed in more detail below, there are uncertainties associated with our achieving and sustaining profitability. We have, from time to time, sought financing in the public markets in order to fund operations and will continue to do so. Our future ability to obtain such financing could be impaired by a variety of factors, including, but not limited to, the price of our common stock, our lack of available shares and general market conditions.

Our cost reduction strategy for manufacturing may not succeed or may be significantly delayed, which may result in our inability to deliver improved margins.

Our cost reduction strategy for manufacturing is based on the assumption that increases in production will result in economies of scale. In addition, our cost reduction strategy relies on advancements in our manufacturing process, global competitive sourcing, engineering design, reducing the cost of capital and technology improvements (including stack life and projected power output). Failure to achieve our cost reduction targets could have a material adverse effect on our results of operations and financial condition.

We have debt and finance obligations outstanding and may incur additional debt in the future, which may adversely affect our financial condition and future financial results.

As of October 31, 2023, our total consolidated debt and finance obligations outstanding (“indebtedness”) was $123.0 million ($119.5 million, net of deferred finance costs).

Our ability to make scheduled payments of principal and interest and other required repayments depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flows from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as selling assets, restructuring operations, restructuring debt or obtaining additional equity capital on terms that may be onerous or dilutive.

We may incur additional indebtedness in the future in the ordinary course of business, which could include onerous restrictions on us. If new debt is added to current debt levels, the risks described above could intensify. Our debt agreements contain representations and warranties, affirmative and negative covenants, and events of default that entitle the lenders to cause our indebtedness under such debt agreements to become immediately due and payable.

We rely on project financing for our generation operating portfolio, which includes debt and tax equity financing arrangements, to realize the benefits provided by investment tax credits and accelerated tax depreciation. In the event that interest rates continue to rise or there are changes in tax policy, our financial results could be harmed.

Rising interest rates may increase our cost of capital. Part of our business strategy is to generate positive cash flows after debt service from our generation operating portfolio. Rising interest rates may have an adverse impact on the cost of debt and thus result in lower cash flows after debt service than we realize today. We also expect that projects we retain in our generation operating portfolio will receive capital from tax equity investors who derive a significant portion of their economic returns through tax benefits. Tax equity investors are generally entitled to substantially all of the project’s tax benefits, such as those provided by the U.S. investment tax credit (“ITC”) and Modified Accelerated Cost Recovery System or bonus depreciation. Our ability to obtain additional financing in the future depends on the continued confidence of financing sources in our business model and the continued availability of tax benefits applicable to our products. If we are unable to enter into tax equity financing agreements with attractive pricing terms, or at all, we may not be able to obtain the capital needed to finance the build out of our generation assets which would impact our overall liquidity and our business, financial condition and results of operations.

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Unanticipated increases or decreases in business growth may result in adverse financial consequences for us.

We operate a 167,000 square-foot manufacturing facility in Torrington, Connecticut where we produce the individual cell packages and assemble the fuel cell modules for our carbonate fuel cell products. The maximum annualized capacity (module manufacturing, final assembly, testing and conditioning) is 100 MW per year under the Torrington facility’s current configuration when being fully utilized. The Torrington facility is sized to accommodate the eventual annualized production capacity of up to 200 MW per year with additional capital investment in machinery, equipment, tooling and inventory.

We have a manufacturing and service facility in Taufkirchen, Germany that has the capability to perform final module assembly for up to 20 MW per year of carbonate sub-megawatt fuel cell power platforms to service the European market. Our European service activities are also operated out of this location.

Our manufacturing and research and development facility in Calgary, Alberta, Canada is focused on the engineering and development of the Company’s SOFC and SOEC technologies. This facility also houses our SOFC and SOEC stack research and development effort and includes equipment for the manufacturing of solid oxide cells and stacks, including advanced manufacturing capabilities. As of October 31, 2023, this facility is capable of producing 1 MW per year of SOFC or approximately 4 MW per year of SOEC. We are investing in expanding this facility with the goal of increasing its production capacity to 10 MW per year of SOFC or 40 MW per year of SOEC, and we expect this expansion to be complete in fiscal year 2024. If this expansion is delayed, our ability to timely fulfill future orders to meet anticipated demand and our future revenues and ability to achieve profitability will be negatively impacted.

If our business grows more quickly than we anticipate, our existing and planned manufacturing facilities may become inadequate and we may need to seek out new or additional space, or retrofit or further equip our existing facilities, at considerable cost to us. If our business does not grow as quickly as we expect, our existing and planned manufacturing facilities would, in part, represent excess capacity for which we may not recover the cost. In that circumstance, our revenues may be inadequate to support our committed costs and our planned growth, and our gross margins and business strategy would be adversely affected.

If our goodwill and other indefinite-lived intangible assets and long-lived assets (including project assets) become impaired, we may be required to record a significant charge to operations.

We have recorded significant impairment charges, and may in the future be required to record significant impairment charges, to operations in our financial statements should we determine that our goodwill, other indefinite-lived intangible assets (i.e., in process research and development (“IPR&D”)) and other long-lived assets (i.e., project assets, property, plant and equipment and amortizing intangible assets) are impaired. Such charges might have a significant impact on our reported financial condition and results of operations. Project assets and property, plant and equipment impairment charges totaled approximately $2.4 million, $1.8 million and $5.0 million for the fiscal years ended October 31, 2023, 2022 and 2021, respectively.

As required by accounting rules, we review our goodwill for impairment at least annually as of July 31 or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit that has goodwill is less than its carrying value. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill might not be recoverable include a significant decline in projections of future cash flows and lower future growth rates in our industry. We review IPR&D for impairment on an annual basis as of July 31 or more frequently if facts and circumstances indicate the fair value is less than the carrying value. If the technology has been determined to be abandoned or not recoverable, we would be required to record a charge reflecting impairment of the asset. We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. We consider a project asset commercially viable and recoverable if such project asset is anticipated to be sellable for a profit, or generates positive cash flows, in excess of the cost of the project asset once it is either fully developed or fully constructed. If any of our project assets are not considered commercially viable or costs are not deemed to be recoverable, we would be required to record a charge reflecting the impairment of such project assets.

Our Advanced Technologies contracts are subject to the risk of termination by the contracting party and we may not realize the full amounts allocated under some contracts due to the lack of Congressional appropriations or early termination.

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A portion of our revenues has been derived from long-term cooperative agreements and other contracts with the DOE and other U.S. government agencies. These agreements are important to the continued development of our technology and our products. We also contract with private sector companies under certain Advanced Technologies contracts to develop strategically important and complementary offerings.

Generally, our privately funded Advanced Technologies contracts, including our EMTEC Joint Development Agreement, contracted demonstration projects undertaken with EMTEC or other ExxonMobil affiliates, and our government research and development contracts are subject to the risk of termination at the convenience of the contracting party and may contain certain milestones and deliverables which we may not be able to meet if actual results or the timing of deliverables differ materially from our original estimates or contractually agreed timelines. Furthermore, with respect to government-funded contracts, irrespective of the amounts allocated by the contracting agency, such contracts are subject to annual Congressional appropriations and the results of government or agency sponsored reviews and audits of our cost reduction projections and efforts. We can only receive funds under government-funded contracts ultimately made available to us annually by Congress as a result of the appropriations process. Accordingly, we cannot be sure whether we will receive the full amounts awarded under our privately funded, government research and development or other contracts. Termination of the contracts or failure to receive the full amounts under any of our Advanced Technologies contracts could materially and adversely affect our business prospects, results of operations and financial condition.

Utility companies may resist the adoption of distributed generation and could impose customer fees or interconnection requirements on our customers that could make our products less desirable.

Investor-owned utilities may resist adoption of distributed generation fuel cell plants as such plants are disruptive to the utility business model that primarily utilizes large central generation power plants and associated transmission and distribution. On-site distributed generation that is on the customer-side of the electric meter competes with the utility. Distributed generation on the utility-side of the meter generally has power output that is significantly less than central generation power plants and may be perceived by the utility as too small to materially impact its business, limiting its interest. Additionally, perceived technology risk may limit utility interest in stationary fuel cell power plants.

Utility companies commonly charge fees to larger, industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back up purposes. These fees could increase the cost to our customers of using our SureSource products and could make our products less desirable, thereby harming our business prospects, results of operations and financial condition.

We depend on third party suppliers for the development and timely supply of key raw materials and components for our products.

We use various raw materials and components to construct a fuel cell module, including nickel and stainless steel that are critical to our manufacturing process. We also rely on third-party suppliers for the BOP components in our products. Suppliers must undergo a qualification process, which takes four to twelve months. We continually evaluate new suppliers, and we are currently qualifying several new suppliers. There are a limited number of suppliers for some of the key components of our products. In addition, to the extent the processes that our suppliers use to manufacture components are proprietary, we may be unable to obtain comparable components from alternative suppliers, all of which could harm our business prospects, results of operations and financial condition. We do not know whether we will be able to maintain long-term supply relationships with our critical suppliers, or secure new long-term supply relationships on terms that will allow us to achieve our objectives, if at all. A supplier’s failure to develop and supply components in a timely manner or to supply components that meet our quality, quantity or cost requirements or our technical specifications, or our inability to obtain alternative sources of these components on a timely basis or on terms acceptable to us, could each harm our ability to manufacture our products. In addition, our supply chain has been, and in the future could be, adversely affected by the COVID-19 pandemic or other pandemics, which may create global shipping and logistics challenges. These challenges may include extended shipping lead times and pricing pressures on transportation and logistics that could adversely impact our ability to meet our production schedules and project deadlines, may result in additional and increased costs, or may otherwise adversely impact our business, results of operations and financial condition. If such events occur and we are unable to pass these costs on to our customers or timely complete projects, we may experience reduced revenue and other adverse impacts on our business, results of operations and financial condition.

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Our business and operations may be adversely affected by new outbreaks of COVID-19 variants or other outbreaks of contagious diseases.

Any outbreaks of contagious diseases, including new outbreaks of COVID-19 variants, and other adverse public health developments in countries where we and our suppliers operate, could have a material and adverse effect on our business, financial condition and results of operations. These effects could include disruptions to or restrictions on our employees’ ability to travel, as well as temporary or prolonged closures of our facilities or the facilities of our customers, suppliers, or other vendors in our supply chain. Any of these events, which may result in disruptions to our supply chain or customer demand, could materially and adversely affect our business and our financial results. The extent to which new outbreaks of COVID-19 variants may impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted. Such developments may include new mutations of the virus, the continued efficacy of vaccines and the actions that may be taken by various governmental authorities in response to a new outbreak, such as periodic quarantine or “shelter-in-place” orders and business closures imposed by various states within the United States, and the impact on the U.S. or global economy. At this time, it is impossible to predict the future impact of COVID-19 or other public health crises that could emerge in the future, including other pandemics or epidemics, on our business, liquidity, capital resources, supply chain and financial results or its effect on clean energy demand, capital budgets of our customers, or demand for our products.

An increase in energy costs, including as a result of the ongoing conflict between Russia and Ukraine, may materially adversely affect our business, financial condition, and results of operations.

Our results of operations can be directly affected by volatility in the cost and availability of energy, which is subject to global supply and demand and other factors beyond our control. The ongoing conflict between Russia and Ukraine has impacted global energy markets, particularly in Europe, leading to higher volatility in prices for crude oil, natural gas and other energy supplies. Higher energy costs result in increases in operating expenses at our manufacturing facilities, in the expense of shipping materials to our facilities, and in the expense of operating our projects for which we procure natural gas, all of which may in turn adversely affect our business, financial condition, and results of operations.

Failure to meet Environmental, Social, and Governance (“ESG”) expectations or standards or to achieve our ESG goals could adversely affect our business, results of operations, financial condition, and stock price.

In recent years, there has been an increased focus from stakeholders on ESG matters, including greenhouse gas emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equality and inclusion, responsible sourcing and supply chain, human rights, and social responsibility. Given our commitment to ESG, we actively manage these issues and have established and publicly announced certain goals, commitments, and targets which we may refine or even expand further in the future. These goals, commitments, and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Evolving stakeholder expectations and our efforts to manage these issues, report on them, and accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact, including on our reputation and stock price.

Such risks and uncertainties include:

• reputational harm, including damage to our relationships with customers, suppliers, investors, governments, or other stakeholders;

• adverse impacts on our ability to sell and manufacture products;

• the success of our collaborations with third parties;

• unfavorable ESG ratings or investor sentiment;

• access to and increased cost of capital; and

• adverse impacts on our stock price.

Any failure, or perceived failure, to meet evolving stakeholder expectations and industry standards or achieve our ESG goals, commitments, and targets could have an adverse effect on our business, results of operations, financial condition, and stock price.

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Risks Related to Sales of our Products

We derive significant revenue from contracts awarded through competitive bidding processes involving substantial costs and risks. Our contracted projects may not convert to revenue, and our project awards and sales pipeline may not convert to contracts, which may have a material adverse effect on our revenue and cash flows.

We expect a significant portion of the business that we will seek in the foreseeable future will be awarded through competitive bidding against other fuel cell technologies and other forms of power generation. The competitive bidding process involves substantial costs and a number of risks, including the significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us and our failure to accurately estimate the resources and costs that will be required to fulfill any contract we win. In addition, following a contract award, we may encounter significant expense, delay or contract modifications or award revocation as a result of our competitors protesting or challenging contracts awarded to us in competitive bidding. Our failure to compete effectively in this procurement environment could adversely affect our revenue and/or profitability.

Some of the project awards we receive and orders we accept from customers require certain conditions or contingencies (such as permitting, interconnection, financing or regulatory approval) to be satisfied, some of which are outside of our control. Certain awards are cancelable or revocable at any time prior to contract execution. The time periods from receipt of an award to execution of a contract, or receipt of a contract to installation may vary widely and are determined by a number of factors, including the terms of the award, governmental policies or regulations that go into effect after the award, the terms of the customer contract and the customer’s site requirements. These same or similar conditions and contingencies may be required by financiers in order to draw on financing to complete a project. If these conditions or contingencies are not satisfied, or changes in laws affecting project awards occur, or awards are revoked or cancelled, project awards may not convert to contracts, and installations may be delayed or canceled. This could have an adverse impact on our revenue and cash flow and our ability to complete construction of a project.

We have signed product sales contracts, EPCs, PPAs and long-term service agreements with customers subject to contractual, technology, operating, commodity (i.e. natural gas) and fuel pricing risks as well as market conditions that may affect our operating results.

We apply the transfer of control over time revenue recognition method under Accounting Standards Codification Topic 606: Revenue from Contracts with Customers to certain service contracts which are subject to estimates. On an annual basis, we perform a review process to help ensure that total estimated contract costs include estimates of costs to complete that are based on the most recent available information. The amount of costs incurred on a cumulative to date basis as a function of estimated costs at completion is applied to contract consideration to determine the cumulative revenue that should be recognized to date.

We have contracted under long-term service agreements with certain customers to provide service on our products over terms up to 20 years. Under the provisions of these contracts, we provide services to maintain, monitor, and repair customer power plants to meet minimum operating levels. Pricing for service contracts is based upon estimates of future costs including future module exchanges. While we have conducted tests to determine the overall life of our products, we have not run certain of our products over their projected useful life or in all potential conditions prior to large scale commercialization. As a result, we cannot be sure that these products will last to their expected useful life or perform as anticipated in all conditions, which could result in warranty claims, performance penalties, maintenance and module replacement costs in excess of our estimates, losses on service contracts and/or a negative perception of our products. As a result of our products’ lack of maturity, we have incurred and may continue to incur charges for warranty claims, performance penalties, maintenance and module replacement costs in excess of our estimates and losses on service contracts. Each of these risks could be material under these contracts and, as a result, we may experience diminished returns or be required to write off all or a portion of our capitalized costs in these project assets.

In certain instances, we have executed PPAs with the utility, end-user of the power or site host of the fuel cell power plant. We may then sell the PPA and power plant to a project investor or retain the project and collect revenue from the sale of power over the term of the PPA, recognizing electricity revenue as power is generated and sold. Our growing portfolio of project assets used to generate and sell power under PPAs and utility tariff programs exposes us to operational risks and uncertainties, including, among other things, lost revenues due to prolonged outages, replacement equipment costs, risks

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associated with facility start-up operations, failures in the availability or acquisition of fuel (including natural gas and renewable natural gas), the impact of severe adverse weather conditions, natural disasters, terrorist attacks, cybersecurity attacks, risks of property damage or injury from energized equipment, availability of adequate water resources and ability to intake and discharge water, use of new or unproven technology, fuel commodity price risk and fluctuating market prices, and lack of alternative available fuel sources.

Our ability to proceed with projects under development and complete construction of projects on schedule and within budget may be adversely affected by escalating costs for materials and fuel (including natural gas and renewable natural gas), supply chain and logistics challenges, tariffs, labor and regulatory compliance, inability to obtain necessary permits, interconnections or other approvals on acceptable terms or on schedule and by other factors. If any development project or construction is not completed, is delayed or is subject to cost overruns, we could become obligated to make delay or termination payments or become obligated for other damages under contracts, experience diminished returns or be required to write off all or a portion of our capitalized costs in the project. Each of these events could have an adverse effect on our business, financial condition, results of operations and prospects.

We extend product warranties for our products, which products are complex and could contain defects and may not operate at expected performance levels, which could impact sales and market adoption of our products, affect our operating results or result in claims against us.

We develop complex and evolving products and we continue to advance the capabilities of our fuel cell stacks. We produce carbonate fuel stacks with a 7-year cell design life. We are also in the process of manufacturing and selling SOEC and SOFC products. We provide product warranties for a specific period of time against manufacturing or performance defects. We accrue for warranty costs based on historical warranty claim experience; however, actual future warranty expenses may be greater than we have assumed in our estimates. Issues have been and may continue to be found in existing or new products including, but not limited to, module decay rates which have exceeded and may continue to exceed design expectations. This has resulted and may continue to result in a delay in recognition or loss of revenues and may result in loss of market share or failure to achieve broad market acceptance. The occurrence of defects has also caused and may continue to cause us to incur significant warranty, support and repair costs in excess of our estimates, could divert the attention of our engineering personnel from our product development efforts, and could harm our relationships with our customers. Although we seek to limit our liability, a product liability claim brought against us, even if unsuccessful, would likely be time consuming, could be costly to defend, and may hurt our reputation in the marketplace. Our customers could also seek and obtain damages from us for their losses.

We currently face and will continue to face significant competition, including from products using other energy sources that may be lower priced or have preferred environmental characteristics.

We compete on the basis of our products’ reliability, efficiency, environmental considerations and cost. Technological advances in alternative energy products, improvements in the electric grid or other sources of power generation that use lower priced fuel or no fuel, or other fuel cell technologies may negatively affect the development or sale of some or all of our products or make our products less economically attractive, non-competitive or obsolete prior to or after commercialization. Significant decreases in the price of alternative technologies or grid delivered electricity, or significant increases in the price of our fuels could have a material adverse effect on our business because other generation sources could be more economically attractive to consumers than our products. Additionally, in certain markets, consumers and regulators have expressed a preference for zero-carbon generating resources over fueled resources, which could adversely affect sales of our products in such markets.

Other companies, some of which have substantially greater resources than ours, are currently engaged in the development of products and technologies that are similar to, or may be competitive with, our products and technologies. Several companies in the U.S. are engaged in fuel cell development, although we are the only domestic company engaged in manufacturing and deployment of stationary carbonate fuel cells. Other emerging fuel cell technologies include small or portable PEM fuel cells, stationary phosphoric acid fuel cells, stationary solid oxide fuel cells, and small residential solid oxide fuel cells. Any of these technologies and any of our competitors has the potential to capture market share in our target markets. There are also other potential fuel cell competitors internationally that could capture market share.

Other than fuel cell developers, we must also compete with companies that manufacture combustion-based distributed power equipment, including various engines and turbines, and have well-established manufacturing, distribution, operating

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and cost features. Electrical efficiency of these products can be competitive with our power plants in certain applications. Significant competition may also come from gas turbine companies and large scale solar and wind technologies.

Our plans are dependent on market acceptance of our products.

Our plans are dependent upon market acceptance of, as well as enhancements to, our products. Fuel cell systems represent an emerging market, and we cannot be sure that potential customers will accept fuel cells as a replacement for traditional power sources or non-fuel based power sources, hydrogen generation sources or storage. As is typical in a rapidly evolving industry, demand and market acceptance for recently introduced products and services are subject to a high level of uncertainty and risk. Since the distributed generation, hydrogen, carbon capture and storage markets are still evolving, it is difficult to predict with certainty the size of these markets and their growth rates. The development of a market for our products may be affected by many factors that are out of our control, including:

● customer reluctance to try a new product;

● local permitting and environmental requirements;

● customer preference for non-fuel based technologies; and

● the emergence of newer, more competitive technologies and products.

If a sufficient market fails to develop or develops more slowly than we anticipate, we may be unable to recover the losses we will have incurred in the development of our products, and we may never achieve profitability.

We must complete development of our new products and develop additional commercially viable products in order to achieve our long-term revenue targets.

In fiscal year 2022, we established new target revenues to be met by the end of fiscal year 2025 and the end of fiscal year 2030. In developing these revenue targets, we assumed the successful commercialization of our SOEC, SOFC and carbon capture products. If we experience delays in meeting our development goals (including manufacturing expansion) for these products, these products exhibit technical defects, or we are unable to meet cost or performance goals with respect to these products, including goals for power output, hydrogen production, rates of carbon capture, useful life and reliability, then our ability to generate revenue and achieve profitability from sales of these new products will be delayed or may not occur at all. In addition, if we are unable to develop additional commercially viable products in the future, we may not be able to generate sufficient revenue to become profitable. The profitable commercialization of our products depends on our ability to reduce the costs of our products, and we cannot assure you that we will be able to sufficiently reduce these costs to achieve profitability.

Our products use inherently dangerous, flammable fuels, operate at high temperatures and use corrosive carbonate material, each of which could subject our business to product liability claims.

Our business exposes us to potential product liability claims that are inherent in products that use hydrogen. Our products utilize fuels such as natural gas and convert these fuels internally to hydrogen that is used by our products to generate electricity. Although our platforms do not combust fuels for the generation of electricity, the fuels we use are combustible and may be toxic. In addition, our SureSource products operate at high temperatures and use corrosive carbonate material, which could expose us to potential liability claims. Although we incorporate a robust design and redundant safety features

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in our power plants, have established comprehensive safety, maintenance, and training programs, follow third-party certification protocols, codes and standards, and do not store natural gas or hydrogen at our power plants, we cannot guarantee that there will not be accidents. Any accidents involving our products or other hydrogen-using products could materially impede widespread market acceptance and demand for our products. In addition, we might be held responsible for damages beyond the scope of our insurance coverage. We also cannot predict whether we will be able to maintain adequate insurance coverage on acceptable terms.

Risks Related to Privacy, Data Protection and Cybersecurity

We are increasingly dependent on information technology, and disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations and the operations of our power plant platforms. In addition, increased information technology security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic and financial information and to manage a variety of business processes and activities, including communication with power plants owned by us or our customers and production, manufacturing, financial, logistics, sales, marketing and administrative functions. Additionally, we collect and store data that is sensitive to us and to third parties. Operating these information technology networks and systems and processing and maintaining this data, in a secure manner, are critical to our business operations and strategy. We depend on our information technology infrastructure to communicate internally and externally with employees, customers, suppliers and others. We also use information technology networks and systems to comply with regulatory, legal and tax requirements and to operate our fuel cell power plants. These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers or other cybersecurity risks including the impact of emerging technologies, telecommunication failures, user errors, natural disasters, terrorist attacks or other catastrophic events. If any of our significant information technology systems suffer severe damage, disruption or shutdown, and our disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results, or our fuel cell power plant operations may be disrupted, exposing us to performance penalties under our contracts with customers.

In addition, information technology security threats — from user error to cybersecurity attacks designed to gain unauthorized access to our systems, networks and data — are increasing in frequency and sophistication. Cybersecurity attacks may range from random attempts to coordinated and targeted attacks, including sophisticated computer crime and advanced persistent threats. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.

Cybersecurity attacks could also include attacks targeting customer data or the security, integrity and/or reliability of the hardware and software installed in our products. We have experienced, and may continue to experience in the future, cybersecurity attacks that have resulted in unauthorized parties gaining access to our information technology systems and networks and, in one instance, gaining control of the information technology system at one of our power plants. However, to date, no cybersecurity attack has resulted in any material loss of data, interrupted our day-to-day operations or had a material impact on our financial condition, results of operations or liquidity. While we actively manage information technology security risks within our control, there can be no assurance that such actions will be sufficient to mitigate all potential risks to our systems, networks and data. In addition to the direct potential financial risk as we continue to build, own and operate generation assets, other potential consequences of a material cybersecurity attack include reputational damage, litigation with third parties, disruption to systems, unauthorized release of confidential or otherwise protected information, corruption of data, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness, results of operations and financial condition. The amount of insurance coverage we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity attack.

Additionally, the legal and regulatory environment surrounding information security and privacy in the U.S. and international jurisdictions is constantly evolving. Violation or non-compliance with any of these laws or regulations, contractual requirements relating to data security and privacy, or our own privacy and security policies, either intentionally or unintentionally, or through the acts of intermediaries could have a material adverse effect on our brand, reputation,

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business, financial condition and results of operations, as well as subject us to significant fines, litigation losses, third-party damages and other liabilities.

Tax, Accounting, Compliance and Regulatory Risks

We are required to maintain effective internal control over financial reporting. In a prior fiscal year, our management identified a material weakness in our internal control over financial reporting. If other control deficiencies are identified in the future, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports in a timely manner, which may adversely affect investor confidence in our Company and, as a result, the value of our common stock.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. Complying with Section 404 requires a rigorous compliance program as well as adequate time and resources. We may not be able to complete our internal control evaluation, testing and any required remediation in a timely fashion. Additionally, if we identify one or more material weaknesses in our internal control over financial reporting, we will not be able to assert that our internal controls are effective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In a prior fiscal year, our management identified a material weakness in our internal control over financial reporting, which has been remediated. We cannot be certain that other material weaknesses and control deficiencies will not occur in the future. If material weaknesses are identified in the future, or if we are not able to comply with the requirements of Section 404 in a timely manner, our reported financial results could be materially misstated and we could be subject to investigations or sanctions by regulatory authorities, which would require additional financial and management resources, and the value of our common stock could decline.

To the extent we identify future weaknesses or deficiencies, there could be material misstatements in our consolidated financial statements and we could fail to meet our financial reporting obligations. As a result, our ability to obtain additional financing on favorable terms or at all could be materially and adversely affected which, in turn, could materially and adversely affect our business, our financial condition and the value of our common stock. If we are unable to assert that our internal control over financial reporting is effective in the future, investor confidence in the accuracy and completeness of our financial reports could be further eroded, which would have a material adverse effect on the price of our common stock.

Our results of operations could vary as a result of changes to our accounting policies or the methods, estimates and judgments we use in applying our accounting policies.

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that could lead us to reevaluate our methods, estimates and judgments.

In future periods, management will continue to reevaluate its estimates for contract margins, service agreements, loss accruals, warranty, performance guarantees, liquidated damages, inventory valuation allowances and allowance for doubtful accounts. Changes in those estimates and judgments could significantly affect our results of operations and financial condition. We will also adopt changes required by the Financial Accounting Standards Board and the SEC.

We may be affected by environmental and other governmental regulation.

We are subject to various federal, state and local laws and regulations relating to, among other things, land use, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of carbon dioxide and pollutants into the atmosphere. Our business exposes us to the risk of harmful substances escaping into the environment, resulting in personal injury or loss of life, damage to or destruction of property, and natural resource damage. Depending on the nature of the claim, our current insurance policies may not adequately reimburse us for costs incurred in settling environmental damage claims, and in some instances, we may not be reimbursed at all. In addition, it is possible that industry-specific laws and regulations will be adopted covering matters such as transmission scheduling, distribution, emissions, and the characteristics and quality of our products, including installation and servicing. These regulations could

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limit the growth in the use of carbonate fuel cell products, decrease the acceptance of fuel cells as a commercial product and increase our costs and, therefore, the price of our products. We believe that our businesses are operating in compliance in all material respects with applicable environmental laws; however, these laws and regulations have changed frequently in the past and it is reasonable to expect additional and more stringent changes in the future. Accordingly, compliance with existing or future laws and regulations could have a material adverse effect on our business prospects, results of operations and financial condition. If we fail to comply with applicable environmental laws and regulations, governmental authorities may seek to impose fines and penalties on us or to revoke or deny the issuance or renewal of operating permits and private parties may seek damages from us. Under those circumstances, we might be required to curtail or cease operations, conduct site remediation or other corrective action, or pay substantial damage claims.

Given that some of our product configurations run on fossil fuels, we may be negatively impacted by CO2-related changes in applicable laws, regulations, ordinances, rules or the requirements of the incentive programs on which we and our customers currently rely. Changes in any of the laws, regulations, ordinances or rules that apply to our installations and new technology could make it illegal or more costly for us or our customers to install and operate our products at particular sites. Additionally, our customers and potential customers’ energy procurement policies may prohibit or limit their willingness to procure our products. Our business prospects may be negatively impacted if we are prevented from completing new installations or our installations become more costly as a result of laws, regulations, ordinances, or rules applicable to our products, or by our customers’ and potential customers’ energy procurement policies.

In addition, certain of our products benefit from federal, state and local governmental incentives, mandates or other programs promoting clean energy generation. Any changes to or termination of these programs could reduce demand for our products, impair sales financing, and adversely impact our business, financial condition and results of operations.

A negative government audit could result in an adverse adjustment of our revenue and costs and could result in civil and criminal penalties.

Government agencies, such as the Defense Contract Audit Agency, routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure, and compliance with applicable laws, regulations, and standards. If the agencies determine through these audits or reviews that we improperly allocated costs to specific contracts, they will not reimburse us for these costs. Therefore, an audit could result in adjustments to our revenue and costs.

Further, although we have internal controls in place to oversee our government contracts, no assurance can be given that these controls are sufficient to prevent isolated violations of applicable laws, regulations and standards. If the agencies determine that we or one of our subcontractors engaged in improper conduct, we may be subject to civil or criminal penalties and administrative sanctions, payments, fines, and suspension or prohibition from doing business with the government, any of which could materially affect our results of operations and financial condition.

Exports of certain of our products are subject to various export control regulations and may require a license or permission from the U.S. Department of State, the U.S. Department of Energy or other agencies.

As an exporter, we must comply with various laws and regulations relating to the export of products, services and technology from the U.S. and with the laws and regulations of other countries having jurisdiction over our operations. We are subject to export control laws and regulations, including the International Traffic in Arms Regulation, the Export Administration Regulation, and the Specially Designated Nationals and Blocked Persons List, which generally prohibit U.S. companies and their intermediaries from exporting certain products, importing materials or supplies, or otherwise doing business with restricted countries, businesses or individuals, and require companies to maintain certain policies and procedures to ensure compliance. We are also subject to the Foreign Corrupt Practices Act, which prohibits improper payments to foreign governments and their officials by U.S. and other business entities. Under these laws and regulations, U.S. companies may be held liable for their actions and actions taken by their strategic or local partners or representatives. If we, or our intermediaries, fail to comply with the requirements of these laws and regulations, or similar laws of other countries, governmental authorities in the United States or elsewhere, as applicable, could seek to impose civil and/or criminal penalties, which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations.

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The Paycheck Protection Program loan received by us in 2020 and subsequently repaid by us in 2021 has resulted in an informal SEC inquiry into our financial disclosures and may subject us to challenges regarding qualification for the loan, enforcement actions, fines and penalties.

On April 20, 2020, we entered into a Paycheck Protection Program Promissory Note, dated April 16, 2020 (the “PPP Note”), evidencing a loan to the Company from Liberty Bank under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Pursuant to the PPP Note, we received total proceeds of approximately $6.5 million on April 24, 2020 (the “PPP Loan”). In accordance with the requirements of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 (the “PPP Flexibility Act”), the PPP Loan may have been fully forgiven if (i) proceeds were used to pay eligible payroll costs, rent, mortgage interest and utilities and (ii) full-time employee headcount and salaries were either maintained during the 24-week period following disbursement of the PPP Loan or restored by December 31, 2020. If not so maintained or restored, forgiveness of the PPP Loan would have been reduced in accordance with regulations issued by the U.S. Small Business Administration. On October 29, 2020, we applied for forgiveness of the PPP Loan. While we believe we met all of the requirements of the CARES Act, as amended by the PPP Flexibility Act, for forgiveness, on February 11, 2021, we withdrew our application for forgiveness and repaid all amounts outstanding under the PPP Note, together with all accrued interest, in part because our financial circumstances had changed substantially since the time of the application for forgiveness, such that we were no longer in need of forgiveness of the PPP Loan. As a result of this repayment, the PPP Loan is not reported on our Consolidated Balance Sheets as of October 31, 2023 and 2022.

Our receipt of the PPP Loan, our submission of a forgiveness application, and our withdrawal of our forgiveness application may result in adverse publicity and damage to our reputation, governmental investigations, inquiries, reviews and audits, such as the SEC inquiry described below, which could consume significant financial and management resources. Any of these events could harm our business, results of operations and financial condition.

On or about May 11, 2020, the Division of Enforcement of the SEC sent us an inquiry requesting that we voluntarily provide information to the SEC pertaining to our application and resulting PPP Loan and how the need for the PPP Loan compares with our filings, disclosures and financial condition. While this request for information was voluntary and we were not obligated to respond, we cooperated with the request for information and voluntarily provided information to the SEC. The SEC did not communicate with us in fiscal year 2022 or fiscal year 2023 about its inquiry.

Risks Related to Our Need for Additional Capital

We will need to raise additional capital, and such capital may not be available on acceptable terms, if at all. If we do raise additional capital utilizing equity, existing stockholders will suffer dilution. If we do not raise additional capital, our business could fail or be materially and adversely affected.

The implementation of our business plan and strategy requires additional capital to fund operations as well as investment by us in project assets. If we are unable to raise additional capital in the amounts required, on terms acceptable to us, or at all, we will not be able to successfully implement our business plan and strategy. Our capital-intensive business model increases the risk that we will not be able to successfully implement our plans if we do not raise additional capital in the amounts required.

In addition, if we raise additional funds through further issuances of our common stock, or securities convertible into or exchangeable for shares of our common stock, into the public market, including shares of our common stock issued upon exercise of options or warrants, holders of our common stock could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of our then-existing capital stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If we cannot raise additional funds when we need them, our business and prospects could fail or be materially and adversely affected. In addition, if additional funds are not secured in the future, we will have to modify, reduce, defer or eliminate parts of our present and anticipated future projects, or sell some or all of our assets.

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Risks Related to our Intellectual Property and Technology Licenses

We depend on our intellectual property, and our failure to protect that intellectual property could adversely affect our future growth and success.

Failure to protect our existing intellectual property rights may result in the loss of our exclusivity or the right to use our technologies. If we do not adequately ensure our freedom to use certain technology, we may have to pay others for rights to use their intellectual property, pay damages for infringement, misappropriation, or other violation, or be enjoined from using such intellectual property. We rely on patent, trade secret, trademark and copyright law to protect our intellectual property.

We previously licensed certain of our carbonate fuel cell manufacturing intellectual property to POSCO Energy on an exclusive basis in the South Korean and broader Asian markets, and pursuant to the terms of the Settlement Agreement with POSCO Energy, we have done so again, but this time on a limited, non-exclusive basis to enable module replacement to POSCO Energy’s existing LTSA customers only. In addition, effective as of June 11, 2019, we entered into the EMTEC License Agreement, pursuant to which we agreed, subject to the terms of the EMTEC License Agreement, to grant EMTEC and its affiliates a non-exclusive, worldwide, fully paid, perpetual, irrevocable, non-transferrable license and right to use our patents, data, know-how, improvements, equipment designs, methods, processes and the like to the extent it is useful to research, develop, and commercially exploit carbonate fuel cells in applications in which the fuel cells concentrate carbon dioxide from industrial and power sources and for any other purpose attendant thereto or associated therewith. Such right and license is sublicensable to third parties performing work for or with EMTEC or its affiliates, but shall not otherwise be sublicensable. Furthermore, on November 5, 2019, we entered into the EMTEC Joint Development Agreement, pursuant to which we agreed to grant EMTEC and its affiliates a worldwide, non-exclusive, royalty-free, irrevocable, perpetual, sub-licensable, non-transferable (subject to certain exceptions) right and license to practice certain Company background intellectual property (to the extent not already licensed pursuant to the EMTEC License Agreement) for new carbonate fuel cell technology in carbon capture applications and hydrogen applications. We depend on POSCO Energy and EMTEC to also protect our intellectual property rights, but we cannot assure you that POSCO Energy or EMTEC will do so.

As of October 31, 2023, we (excluding our subsidiaries) had 139 U.S. patents and 282 patents in other jurisdictions covering our fuel cell technology (in certain cases covering the same technology in multiple jurisdictions), with patents directed to various aspects of our SureSource technology, SOFC technology, PEM fuel cell technology and applications thereof. As of October 31, 2023, we also had 34 patent applications pending in the U.S. and 98 patent applications pending in other jurisdictions. As of October 31, 2023, our subsidiary, Versa Power Systems, Ltd. (“Versa”), had 24 U.S. patents and 86 international patents covering SOFC technology (in certain cases covering the same technology in multiple jurisdictions). As of October 31, 2023, Versa also had 9 pending U.S. patent applications and 26 patent applications pending in other jurisdictions. In addition, as of October 31, 2023, our subsidiary, FuelCell Energy Solutions, GmbH, had license rights to 2 U.S. patents and 7 patents outside the U.S. (in certain cases covering the same technology in multiple jurisdictions) for carbonate fuel cell technology licensed from Fraunhofer IKTS.

Some of our intellectual property is not covered by any patent or patent application and includes trade secrets and other know-how that is not able to be patented, particularly as it relates to our manufacturing processes and engineering design. In addition, some of our intellectual property includes technologies and processes that may be similar to the patented technologies and processes of third parties. If we are found to be infringing, misappropriating or otherwise violating third-party intellectual property, we do not know whether we will be able to obtain licenses to use such intellectual property on acceptable terms, if at all. Our patent position is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope, and enforceability of a particular patent.

We cannot assure you that any of the U.S. or international patents owned by us (including our subsidiaries) or other patents that third parties license to us will not be invalidated, circumvented, challenged, rendered unenforceable or licensed to others, or that any of our owned or licensed pending or future patent applications will be issued with the breadth of claim coverage sought by us or our licensors, if issued at all. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in certain foreign countries.

We also seek to protect our proprietary intellectual property, including intellectual property that may not be patented or able to be patented, in part by confidentiality agreements and, if applicable, inventors’ rights agreements with our subcontractors, vendors, suppliers, consultants, strategic business associates and employees. We cannot assure you that

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these agreements will not be breached, that we will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships. Certain of our intellectual property has been licensed to us on a non-exclusive basis from third parties that may also license such intellectual property to others, including our competitors. If our licensors are found to be infringing, misappropriating or otherwise violating third-party intellectual property, we do not know whether we will be able to obtain licenses to use the intellectual property licensed to us on acceptable terms, if at all.

If necessary or desirable, we may seek extensions of existing licenses or further licenses under the patents or other intellectual property rights of others. However, we can give no assurances that we will obtain such extensions or further licenses or that the terms of any offered licenses will be acceptable to us. The failure to obtain a license from a third party for intellectual property that we use at present could cause us to incur substantial liabilities, and to suspend the manufacture or shipment of products or our use of processes requiring the use of that intellectual property.

While we are not currently engaged in any material intellectual property litigation, we could become subject to lawsuits in which it is alleged that we have infringed, misappropriated or otherwise violated the intellectual property rights of others or commence lawsuits against others who we believe are infringing, misappropriating or otherwise violating our rights or violating their agreements to protect our intellectual property. Our involvement in intellectual property litigation could result in significant expense to us, adversely affecting the development of sales of the challenged product or intellectual property and diverting the efforts of our technical and management personnel, whether or not that litigation is resolved in our favor.

The U.S. government has certain rights relating to our intellectual property, including the right to restrict or take title to certain patents.

Multiple U.S. patents that we own have resulted from government-funded research and are subject to the risk of exercise of “march-in” rights by the government. March-in rights refer to the right of the U.S. government or a government agency to exercise its non-exclusive, royalty-free, irrevocable worldwide license to any technology developed under contracts funded by the government if the contractor fails to continue to develop the technology. These “march-in” rights permit the U.S. government to take title to these patents and license the patented technology to third parties if the contractor fails to utilize the patents.

Risks Related to Our Common and Preferred Stock

Our stock price has been and could remain volatile.

The market price for our common stock has been and may continue to be volatile and subject to extreme price and volume fluctuations in response to market and other factors, including the following, some of which are beyond our control:

● failure to meet commercialization milestones;

● the loss of a major customer or a contract;

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● additions or departures of key personnel;

● investor perception of our industry or our prospects;

● insider selling or buying;

● demand for our common stock;

● dilution from issuances of our common stock;

● general market trends or preferences for non-fueled resources;

● general technological or economic trends; and

The closing price of our common stock on December 14, 2023 was $1.56 per share. There can be no assurance that the current stock price will be maintained, and it is possible that our stock price could drop significantly. In the past, following periods of volatility in the market price of their stock, companies have been the subject of securities class action litigation. If we become involved in securities class action litigation in the future, it could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business prospects, results of operations and financial condition.

Future sales of substantial amounts of our common stock could affect the market price of our common stock.

Future sales of substantial amounts of our common stock, or securities convertible into or exchangeable for shares of our common stock, into the public market, including shares of our common stock issued upon exercise of options or warrants, or perceptions that those sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital in the future.

Provisions of Delaware and Connecticut law and of our certificate of incorporation and by-laws may make a takeover more difficult.

Provisions in our Certificate of Incorporation, as amended (“Certificate of Incorporation”), and Second Amended and Restated By-Laws (“By-laws”) and in Delaware and Connecticut corporate law may make it difficult and expensive for a third-party to pursue a tender offer, change in control or takeover attempt that is opposed by our management and board of directors. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or change in our management and board of directors.

Our By-laws provide that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a judicial forum deemed favorable by the stockholder for disputes with us or our directors, officers or employees.

Our By-laws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our Certificate of Incorporation or our By-laws, any action to interpret, apply, enforce, or determine the validity of our Certificate of Incorporation or By-laws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes against us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our By-laws to be inapplicable or unenforceable in such an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

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The rights of our Series B Preferred Stock could negatively impact our cash flows and dilute the ownership interest of our stockholders.

The terms of our Series B Preferred Stock also provide rights to their holders that could negatively impact us. Holders of the Series B Preferred Stock are entitled to receive cumulative dividends at the rate of $50 per share per year, payable either in cash or in shares of our common stock. To the extent the dividend is paid in shares of our common stock, additional issuances could be dilutive to our existing stockholders and the sale of those shares could have a negative impact on the price of our common stock. A share of our Series B Preferred Stock may be converted at any time, at the option of the holder, into 0.5910 shares of our common stock (which is equivalent to an initial conversion price of $1,692 per share), plus cash in lieu of fractional shares. Furthermore, the conversion rate applicable to the Series B Preferred Stock is subject to additional adjustment upon the occurrence of certain events.

The Series B Preferred Stock ranks senior to our common stock with respect to payments upon liquidation, dividends, and distributions.

The rights of the holders of our Series B Preferred Stock rank senior to our obligations to our common stockholders. Upon our liquidation, the holders of Series B Preferred Stock are entitled to receive $1,000.00 per share plus all accumulated and unpaid dividends (the “Liquidation Preference”). Until the holders of Series B Preferred Stock receive the Liquidation Preference with respect to their shares of Series B Preferred Stock in full, no payment will be made on any junior shares, including shares of our common stock. The existence of senior securities such as the Series B Preferred Stock could have an adverse effect on the value of our common stock.

General Risk Factors

Litigation could expose us to significant costs and adversely affect our business, financial condition, and results of operations.

We are, or may become, party to various lawsuits, arbitrations, mediations, regulatory proceedings and claims, which may include lawsuits, arbitrations, mediations, regulatory proceedings or claims relating to commercial liability, product recalls, product liability, product claims, employment matters, environmental matters, breach of contract, intellectual property, indemnification, stockholder suits, derivative actions or other aspects of our business. Litigation (including the other types of proceedings identified above) is inherently unpredictable, and although we may believe we have meaningful defenses in these matters, we may incur judgments or enter into settlements of claims that could have a material adverse effect on our business, financial condition, and results of operations. The costs of responding to or defending litigation may be significant and may divert the attention of management away from our strategic objectives. There may also be adverse publicity associated with litigation that may decrease customer confidence in our business or our management, regardless of whether the allegations are valid or whether we are ultimately found liable.

Financial markets worldwide have experienced heightened volatility and instability which may have a material adverse impact on our Company, our customers and our suppliers.

Financial market volatility can affect the debt, equity and project finance markets. This may impact the amount of financing available to all companies, including companies with substantially greater resources, better credit ratings and more successful operating histories than ours. It is impossible to predict future financial market volatility and instability and the impact on our Company, and it may have a materially adverse effect on us for a number of reasons, such as:

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Weakness in the economy and other conditions affecting the financial stability of our customers could negatively impact future sales of our products and our results of operations.

Our products require a long-term investment from our customers. Global inflationary pressures, particularly in the United States, have increased recently to levels not seen in recent years. Should our customers be impacted by these pressures, it could result in delays in purchasing decisions which could impact future sales of our products and our results of operations. In addition, downturns in the worldwide economy, due to inflation, geopolitics, major central bank policy actions including interest rate increases, public health crises, or other factors could also adversely affect our business.

Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity.

Economic and political events in 2022 and 2023 have altered the landscape in which we and other U.S. companies operate in a variety of ways. In response to inflationary pressures, the U.S. Federal Reserve has raised interest rates, resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing. World events, such as the Russian invasion of Ukraine and the resulting economic sanctions, have impacted the global economy. Prolonged inflationary conditions, high and/or increased interest rates, and additional sanctions or retaliatory measures related to the Russia-Ukraine crisis, or other geo-political situations, could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices and supply chain constraints. At this time, the extent and duration of these economic and political events and their effects on the economy and the Company are impossible to predict.

Our future success will depend on our ability to attract and retain qualified management, technical, and other personnel.

Our future success is substantially dependent on the services and performance of our executive officers and other key management, engineering, scientific, manufacturing and operating personnel. The loss of the services of any such personnel could materially adversely affect our business. Our ability to achieve our commercialization plans and to increase production at our manufacturing facility in the future will also depend on our ability to attract and retain additional qualified personnel, and we cannot assure you that we will be able to do so. Recruiting personnel for the fuel cell industry is competitive. Our inability to attract and retain additional qualified personnel, or the departure of key employees, could materially and adversely affect our development, commercialization and manufacturing plans and, therefore, our business prospects, results of operations and financial condition. In addition, our inability to attract and retain sufficient personnel to quickly increase production at our manufacturing facility when and if needed to meet increased demand may adversely impact our ability to respond rapidly to any new product, growth or revenue opportunities. Our inability to attract and retain sufficient qualified personnel to staff our government or third party funded research contracts may result in our inability to complete such contracts or terminations of such contracts, which may adversely impact financial conditions and results of operations.

We are subject to risks inherent in international operations.

Since we market our products both inside and outside the U.S., our success depends in part on our ability to secure international customers and our ability to manufacture products that meet foreign regulatory and commercial requirements in target markets, as well as the ability to provide service to our international customers. We have limited experience developing and manufacturing our products to comply with the commercial and legal requirements of international markets. In addition, we are subject to tariff regulations and requirements for export licenses, particularly with respect to the export of some of our technologies. We face numerous challenges in our international expansion, including the strain any future growth may place on our management, service and operations teams and financial infrastructure, unexpected changes in regulatory requirements and other geopolitical risks, fluctuations in currency exchange rates, longer accounts receivable requirements and collections, greater bonding and security requirements, difficulties in managing international operations, potentially adverse tax consequences, restrictions on repatriation of any earnings and the burdens of complying

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with a wide variety of international laws. Any of these factors could adversely affect our results of operations and financial condition.

We source raw materials and parts for our products on a global basis, which subjects us to a number of potential risks, including the impact of export duties and quotas, trade protection measures imposed by the U.S. and other countries including tariffs, potential for labor unrest, changing global and regional economic conditions and current and changing regulatory environments. Changes to these factors may have an adverse effect on our ability to source raw materials and parts in line with our current cost structure.

Although our reporting currency is the U.S. dollar, we conduct our business and incur costs in the local currency of most countries in which we operate. As a result, we are subject to currency translation and transaction risk. Changes in exchange rates between foreign currencies and the U.S. dollar could affect our net sales and cost of sales and could result in exchange gains or losses. We cannot accurately predict the impact of future exchange rate fluctuations on our results of operations.

We could also expand our business into new and emerging markets, many of which have an uncertain regulatory environment relating to currency policy. Conducting business in such markets could cause our exposure to changes in exchange rates to increase, due to the relatively high volatility associated with emerging market currencies and potentially longer payment terms for our proceeds. Our ability to hedge foreign currency exposure is dependent on our credit profile with financial institutions that are willing and able to do business with us. Deterioration in our credit position or a significant tightening of the credit market conditions could limit our ability to hedge our foreign currency exposure and, therefore, result in exchange gains or losses.

Item 1B.UNRESOLVED STAFF COMMENTS

None.

Item 1C. CYBERSECURITY

Not applicable.

Item 2. PROPERTIES

The following is a summary of our offices and locations:

Square Lease Expiration

Location Business Use Footage Dates

Taufkirchen, Germany Manufacturing and Administrative 20,000 June 2024

Calgary, Alberta, Canada Storage 18,627 July 2024

Item 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in legal proceedings, including, but not limited to, regulatory proceedings, claims, mediations, arbitrations and litigation, arising out of the ordinary course of its business (“Legal Proceedings”).

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Although the Company cannot assure the outcome of such Legal Proceedings, management presently believes that the result of such Legal Proceedings, either individually, or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements, and no material amounts have been accrued in the Company’s consolidated financial statements with respect to these matters.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

FuelCell Common Stock

Our common stock has been publicly traded since June 25, 1992. Our common stock trades under the symbol “FCEL” on the Nasdaq Global Market.

On December 14, 2023, the closing price of our common stock on the Nasdaq Global Market was $1.56 per share. As of December 14, 2023, there were 118 holders of record of our common stock. This does not include the number of persons whose stock is in nominee or “street” name accounts through brokers.

We have never paid a cash dividend on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. In addition, the terms of our Series B Preferred Stock prohibit the payment of dividends on our common stock unless all dividends on the Series B Preferred Stock have been paid in full.

FuelCell Preferred Stock

Information concerning the Company’s Series B Preferred Stock is incorporated herein by reference to Note 13. “Redeemable Preferred Stock” of the Notes to the Consolidated Financial Statements.

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Performance Graph

The following graph compares the annual change in the Company’s cumulative total stockholder return on its common stock for the five fiscal years ended October 31, 2023 with the cumulative stockholder total return on the Russell 2000 Index, a peer group consisting of Standard Industry Classification Group Code 3690 companies listed on the Nasdaq Global Market and New York Stock Exchange and a customized 14 company peer group. It assumes $100.00 invested on October 31, 2018 with dividends reinvested.

Equity Compensation Plan Information

See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans.

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Stock Repurchases

The following table sets forth information with respect to purchases made by us or on our behalf of our common stock during the periods indicated:

Item 6. RESERVED

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The following discussion should be read in conjunction with the information included in Item 8 of this Annual Report on Form 10-K. Unless otherwise indicated, the terms “Company”, “FuelCell Energy”, “we”, “us”, and “our” refer to FuelCell Energy, Inc. and its subsidiaries. All tabular dollar amounts are in thousands. In certain instances, the capitalized terms used in this section are defined elsewhere in this Annual Report on Form 10-K, including in the Notes to the Consolidated Financial Statements.

In addition to historical information, this discussion and analysis contains forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please see the section of this Annual Report entitled “Forward-Looking Statement Disclaimer” for a discussion of the uncertainties, risks and assumptions associated with these statements, as well as the other risks set forth in our filings with the SEC including those set forth under the section entitled “Item 1A — Risk Factors” in this Annual Report.

Overview

Headquartered in Danbury, Connecticut, FuelCell Energy is a global leader in delivering environmentally responsible distributed baseload energy platform solutions through our proprietary fuel cell technology. Today, we offer commercial technology that produces clean electricity, heat, clean hydrogen, and water and is also capable of recovering and capturing carbon for utilization and/or sequestration, depending on product configuration and application. We also continue to invest in product development and commercializing technologies that are expected to add new capabilities to our platforms’ abilities to deliver hydrogen and long duration hydrogen-based energy storage through our solid oxide technologies, as well as further enhance our existing platforms’ carbon capture solutions.

FuelCell Energy is focused on advancing sustainable clean energy technologies that address some of the world’s most critical challenges around energy access, security, resilience, reliability, affordability, safety and environmental stewardship. As a leading global manufacturer of proprietary fuel cell technology platforms, FuelCell Energy is uniquely positioned to serve customers worldwide with sustainable products and solutions for industrial and commercial businesses, utilities, governments, municipalities, and communities.

FuelCell Energy, based in Connecticut, was founded in 1969 as a New York corporation to provide applied research and development services on a contract basis. We completed our initial public offering in 1992 and reincorporated in Delaware in 1999. We began selling stationary fuel cell power plants commercially in 2003.

Results of Operations

Management evaluates our results of operations and cash flows using a variety of key performance indicators, including revenues compared to prior periods and internal forecasts, costs of our products and results of our cost reduction initiatives, and operating cash use. These are discussed throughout the “Results of Operations” and “Liquidity and Capital Resources” sections. Results of Operations are presented in accordance with U.S. GAAP.

The following discussion and analysis of our Results of Operations and Liquidity and Capital Resources includes a comparison of the fiscal year ended October 31, 2023 (“fiscal year 2023”) to the fiscal year ended October 31, 2022 (“fiscal year 2022”). A similar discussion and analysis that compares fiscal year 2022 to the fiscal year ended October 31, 2021 (“fiscal year 2021”) can be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Form 10-K for the fiscal year ended October 31, 2022.

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Comparison of the Years Ended October 31, 2023 and 2022

Revenues and Costs of revenues

Revenues and costs of revenues for the years ended October 31, 2023 and 2022 were as follows:

Year Ended October 31, Change

Gross margin (8.5)% (22.7)%

Total revenues for the year ended October 31, 2023 decreased $7.1 million, or 5%, to $123.4 million from $130.5 million for the year ended October 31, 2022. Total costs of revenues for the year ended October 31, 2023 decreased by $26.1 million, or 16%, to $133.9 million from $160.1 million for the year ended October 31, 2022. The Company’s gross margin was (8.5)% in fiscal year 2023, as compared to a gross margin of (22.7)% in fiscal year 2022. A discussion of the changes in product revenues, service agreements revenues, generation revenues and Advanced Technologies contract revenues follows.

Product revenues

Product revenues, cost of product revenues and gross profit (loss) from product revenues for the years ended October 31, 2023 and 2022 were as follows:

Year Ended October 31, Change

Product revenues gross margin 34.3% (7.5)%

Product revenues for the year ended October 31, 2023 were $19.6 million compared to $60.0 million for the year ended October 31, 2022. Our December 2021 Settlement Agreement (the “Settlement Agreement”) with POSCO Energy Co., Ltd. (“POSCO Energy”) and its subsidiary, Korea Fuel Cell Co., Ltd. (“KFC”), included an option to purchase an additional 14 modules (in addition to the 20 modules that were purchased by KFC during fiscal year 2022). This option included a material right related to an extended warranty obligation for the modules. The option was not exercised by KFC as of the expiration date of December 31, 2022 and, as a result, during the year ended October 31, 2023, the Company recognized $9.1 million of product revenues, which represents the consideration allocated to the material right if the option had been exercised. Product revenues for the fiscal year ended October 31, 2023 also included $10.5 million of revenue that was recognized in October 2023 when certain of the modules previously sold by the Company to KFC were installed by KFC at the power plants operated by Noeul Green Energy Co., Ltd. (“Noeul Green Energy”), the Company entered into a new long-term service agreement to service these power plants (including the modules installed by KFC), and the existing service agreement between KFC and Noeul Green Energy was simultaneously terminated. Recognition of this revenue was previously constrained due to an obligation of the Company to KFC related to modules previously sold by the Company to KFC. This obligation was relieved in conjunction with the execution of the new long-term service agreement with Noeul Green Energy.

Cost of product revenues decreased $51.6 million for the year ended October 31, 2023 to $12.9 million, compared to $64.5 million in the same period in the prior year. The decrease is primarily due to the lack of module sales during the year ended October 31, 2023. Manufacturing variances, primarily related to production volumes and unabsorbed overhead costs, totaled approximately $12.0 million for the year ended October 31, 2023 compared to approximately $13.5 million for the year ended October 31, 2022. The reduction in manufacturing variances for the year ended October 31, 2023 was driven primarily by an overall reduction in actual manufacturing costs. Cost of product revenues for the year ended October 31, 2022 included an impairment charge of approximately $1.0 million related to the cessation of use of conditioning equipment in Danbury, CT, which has been replaced by new equipment at our production facility in Torrington, CT.

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Product revenues for the year ended October 31, 2023 generated a gross profit of $6.7 million compared to a gross loss of $4.5 million for the year ended October 31, 2022. The gross profit is a direct result of the product revenues recognized in the year ended October 31, 2023 related to the expiration without exercise of KFC’s module purchase option, the release of previously constrained product revenue and the fact that there were no corresponding costs associated with the recognition of these revenues.

For the year ended October 31, 2023, we operated at an annualized production rate of approximately 32.7 MW, which is a decrease from the annualized production rate of 39.3 MW for the year ended October 31, 2022.

As of October 31, 2023 and 2022, there was $0 and $9.1 million, respectively, of product backlog.

Service agreements revenues

Service agreements revenues and associated cost of revenues for the years ended October 31, 2023 and 2022 were as follows:

Year Ended October 31, Change

Service agreements revenues gross margin 8.4% (34.8)%

Revenues for the year ended October 31, 2023 from service agreements increased $36.3 million to $49.1 million from $12.8 million for the year ended October 31, 2022. During the year ended October 31, 2023 there were 15 new module exchanges – one new module exchange at the plant at Trinity College, two new module exchanges at the plant in Woodbridge, CT, which originally achieved commercial operations in fiscal year 2017, and 12 new module exchanges at the plants owned by Korea Southern Power Company in South Korea, which achieved commercial operations in fiscal year 2018. The increase in service agreements revenues for the year ended October 31, 2023 is primarily due to the fact that 15 new module exchanges occurred during the period, while there were fewer module exchanges during the year ended October 31, 2022. Both periods also included a reduction in service agreements revenues – specifically, a $2.1 million reduction in the fourth quarter of fiscal year 2023 and a $3.8 million reduction in the fourth quarter of fiscal year 2022, in each case as a result of higher future cost estimates related to future module exchanges compared to our prior estimates. Because we recognize revenue on service contracts over time using a cost input method in accordance with Accounting Standards Codification Topic 606 (“ASC 606”), we evaluate the cost estimates associated with each service contract periodically and adjust revenue accordingly. In fiscal years 2023 and 2022, we reviewed our cost estimates relating to our service contracts and identified higher estimated costs than those that were previously estimated. These higher estimated costs are due to our expectation that supply chain costs will remain high relative to prior years and that our production volumes will remain low, resulting in an increase in expected module costs.

For the year ended October 31, 2023, accrued performance penalties under our service agreements totaled approximately $1.0 million compared to approximately $0.7 million for the year ended October 31, 2022. Accrued performance guarantees represent variable consideration for service contracts and accordingly are recorded as an offset to service agreements revenues.

Cost of service agreements revenues increased $27.7 million to $45.0 million for the year ended October 31, 2023 from $17.2 million for the year ended October 31, 2022. Cost of service agreements revenues were higher for the year ended October 31, 2023 than for the year ended October 31, 2022 due to the fact that 15 new module exchanges occurred during the year ended October 31, 2023, while there were fewer module exchanges during the year ended October 31, 2022.

We record loss accruals for service agreements when the estimated cost of future module exchanges and maintenance and monitoring activities exceeds the remaining unrecognized consideration. Estimates for future costs on service agreements are determined by a number of factors including the estimated remaining life of the module(s), used replacement modules available, and future operating plans for the power platform. The net increase of approximately $2.3 million to the loss accrual in fiscal year 2023 was a result of adjustments to future cost estimates related to future module exchanges, as further described above.

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We work to continuously improve and mature our products and implement lessons learned into our product designs and manufacturing process subsequent to introduction. In 2021, we examined data related to module field performance, identified improvement opportunities and invested in improvement initiatives with respect to our core molten carbonate technology. We continue to invest in such improvement initiatives. We have identified improvement opportunities ranging from improved thermal management by reducing internal temperature to improving the performance of our electrical balance of plant and implemented design changes to our commercial platforms which are expected to improve overall product performance. As it relates to our fuel cell modules, these improvements center around delivering more uniform temperature distribution within the cell stack within the modules with the intent of improving output over the life of the modules to achieve the product’s expected design life.

Cost of service agreements revenues for both years includes planned maintenance activities, module exchanges and continued investment in the service fleet in order to improve performance. Cost of service agreements includes maintenance and operating costs and module exchanges.

Overall gross profit from service agreements revenues was $4.1 million for the year ended October 31, 2023 which increased from a gross loss of $4.4 million for the year ended October 31, 2022. The overall gross margin was 8.4% for the year ended October 31, 2023 compared to a gross margin loss of 34.8% in the comparable prior year period. Gross margin was higher during the year ended October 31, 2023 primarily due to the fact that 15 new module exchanges were completed during the year ended October 31, 2023 (compared to fewer module exchanges during the year ended October 31, 2022) and that such module exchanges were performed pursuant to service agreements with higher margins.

As of October 31, 2023, service agreements backlog totaled $140.8 million compared to $114.0 million as of October 31, 2022. This backlog is for service agreements of up to 20 years at inception and is expected to generate positive margins and cash flows based on current estimates.

Generation revenues

Generation revenues and related costs for the years ended October 31, 2023 and 2022 were as follows:

Year Ended October 31, Change

Gross loss from generation revenues $ (25,405) $ (26,961) $ 1,556 (6)%

Generation revenues gross margin (67.7)% (74.5)%

Revenues from generation for the year ended October 31, 2023 totaled $37.5 million, which represents an increase of $1.3 million from revenue recognized of $36.2 million for the year ended October 31, 2022. Generation revenues for the years ended October 31, 2023 and 2022 reflect revenue from electricity generated under our power purchase agreements (“PPAs”) and the sale of renewable energy credits. The increase in generation revenues for the year ended October 31, 2023 is primarily due to the fact that we recorded a full year of generation revenues associated with the Long Island Power Authority (“LIPA”) project in Yaphank, New York (which achieved commercial operations in December 2021) and the fact that the 7.4 MW fuel cell project located on the U.S. Navy Submarine Base in Groton, CT(the “Groton Project”) achieved commercial operations and began generating revenues in the first quarter of fiscal year 2023.

Cost of generation revenues totaled $62.9 million for the year ended October 31, 2023. The decrease from the comparable prior year period was primarily due to a derivative gain during the year ended October 31, 2023 of $4.1 million as a result of net settling certain natural gas purchases under a previous normal purchase normal sale contract designation, which resulted in a change to mark-to-market accounting. The decrease is also a result of lower operating costs for existing plants due to efficiencies resulting from plant maintenance activities and module exchanges. The decrease was partially offset by an increase in expensed construction and gas costs related to the Toyota project (expensed construction and gas costs were approximately $22.9 million for the year ended October 31, 2023 compared to expensed construction costs for the comparable prior year period of $22.1 million) and costs of approximately $7.3 million related to the increased size of the installed fleet with the Groton Project achieving commercial operations. Cost of generation revenues also includes an impairment charge of $2.4 million for the year ended October 31, 2023 relating to a project asset for which a PPA was ultimately not awarded.

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As further background on the costs related to the Toyota project, it was determined in the fourth quarter of fiscal year 2021 that a potential source of renewable natural gas (“RNG”) at favorable pricing was no longer sufficiently probable for the Toyota project resulting in impairment of the asset, given the negative cash flow profile of the project. Thus, as the Toyota project was being constructed, only amounts associated with inventory components that could be redeployed for alternative use were capitalized. The balance of costs incurred (i.e., the approximately $22.9 million associated with the construction and gas costs mentioned above) were expensed as cost of generation revenues.

In the fourth quarter of fiscal year 2022, the Company made the decision not to proceed with development of the 7.4 MW and 1.0 MW Hartford projects given the then current economic profile of these projects and, as a result, incurred an impairment charge of $0.8 million.

Refer to Note 6. “Project Assets” to the Consolidated Financial Statements for more information on the impairment charge for the fiscal year ended October 31, 2023.

We currently have three projects with fuel sourcing risk, which are the Toyota project, which requires procurement of RNG, and our Derby, CT 14.0 MW and 2.8 MW projects, both of which require natural gas for which there is no pass-through mechanism. A two-year (through May of 2025) fuel supply contract has been executed for the Toyota project. Six-year (through October 2029) fuel supply contracts have been executed for the 14.0 MW and 2.8 MW projects in Derby, CT. The Company will look to extend the duration of these contracts should market and credit conditions allow. If the Company is unable to secure fuel on favorable economic terms, it may result in impairment charges to the Derby project assets and further charges for the Toyota project asset.

The overall gross loss from generation revenues was $29.5 million for the year ended October 31, 2023, which represents an increase of $2.6 million from a gross loss of $27.0 million for the year ended October 31, 2022. The increase in gross loss from generation revenues is primarily related to the impairment charge of $2.4 million recorded for the year ended October 31, 2023 relating to a project asset for which a PPA was ultimately not awarded and the increase in construction and gas costs being expensed related to the Toyota project, partially offset by higher margins from the operating fleet (due in part to the higher operating output of the generation fleet portfolio) during the year ended October 31, 2023 compared to the year ended October 31, 2022.

As of October 31, 2023 and 2022, generation backlog totaled $0.9 billion.

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Advanced Technologies contracts

Advanced Technologies contract revenues and related costs for the years ended October 31, 2023 and 2022 were as follows:

Year Ended October 31, Change

Advanced Technologies contract gross margin 23.4% 29.4%

Advanced Technologies contract revenues decreased to $17.2 million for the year ended October 31, 2023 compared to $21.5 million for the year ended October 31, 2022. Compared to the year ended October 31, 2022, Advanced Technologies contract revenues recognized under the Joint Development Agreement between the Company and ExxonMobil Technology and Engineering Company f/k/a ExxonMobil Research and Engineering Company (“EMTEC”) (which was originally effective as of October 31, 2019) (as amended, the “EMTEC Joint Development Agreement”) were approximately $0.3 million higher during the year ended October 31, 2023 and Advanced Technologies contract revenues recognized under government and other contracts were approximately $4.6 million lower for the year ended October 31, 2023 as a result of the allocation of engineering resources during the year based on the scope of the contracts in the year.

Cost of Advanced Technologies contract revenues decreased $2.0 million to $13.2 million for the year ended October 31, 2023, compared to $15.2 million for the year ended October 31, 2022. This decrease is a result of the level of activity and the scope of work performed under the EMTEC Joint Development Agreement during the year ended October 31, 2023, compared to the year ended October 31, 2022.

Advanced Technologies contracts for the year ended October 31, 2023 generated a gross profit of $4.0 million compared to a gross profit of $6.3 million for the year ended October 31, 2022. The lower gross profit was primarily due to the higher costs recognized under government contracts during the year ended October 31, 2023, offset by favorable margins under the EMTEC Joint Development Agreement during the year ended October 31, 2023 compared to the year ended October 31, 2022.

As of October 31, 2023, Advanced Technologies contract backlog totaled $15.3 million compared to $22.9 million at October 31, 2022.

Administrative and selling expenses

Administrative and selling expenses were $64.5 million and $79.6 million for the years ended October 31, 2023 and 2022, respectively. The year ended October 31, 2022 included non-recurring legal expenses of $24.0 million associated with the settlement of the Company’s disputes with POSCO Energy and KFC. Excluding the $24.0 million in legal fees, administrative and selling expenses were higher during the year ended October 31, 2023 than during the year ended October 31, 2022 primarily due to an increase in compensation expense resulting from an increase in headcount in support of sales, marketing and business expansion.

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Research and development expenses

Research and development expenses increased to $61.0 million for the year ended October 31, 2023 compared to $34.5 million for the year ended October 31, 2022. The increase is primarily due to an increase in spending on the Company’s ongoing commercial development efforts related to our solid oxide power generation and electrolysis platforms and carbon separation and carbon capture solutions compared to the comparable prior year period. During fiscal year 2023, the Company increased headcount by 78 employees, many of whom are focused on the commercialization and manufacturing of these new products. Research and development activities during the fiscal year included designing and testing components and increasing manufacturing capacity at our Calgary facility.

Loss from operations

Loss from operations for the year ended October 31, 2023 was $136.1 million compared to $143.7 million for the year ended October 31, 2022. This decrease was primarily driven by decreased administrative and selling expenses compared to the year ended October 31, 2022, offset by higher research and development expenses compared to the year ended October 31, 2022. The decrease in loss from operations was also due, in part, to a lower gross loss of $10.5 million for the year ended October 31, 2023, compared to gross loss of $29.6 million for the year ended October 31, 2022. The lower gross loss was driven by higher product and service agreements gross margins.

Interest expense

Interest expense for the years ended October 31, 2023 and 2022 was $7.2 million and $6.4 million, respectively. Interest expense for both periods includes interest associated with finance obligations for failed sale-leaseback transactions and interest on the loans associated with the Bridgeport Fuel Cell Project which were extinguished in May 2023. Interest expense for the year ended October 31, 2023 also includes interest on the OpCo Financing Facility (as defined elsewhere herein), which was entered into in May 2023, and interest on the Senior Back Leverage Loan Facility and the Subordinated Back Leverage Loan Facility (in each case as defined elsewhere herein), which were entered into in August 2023.

Interest income

Interest income was $15.8 million and $3.4 million for the years ended October 31, 2023 and 2022, respectively. Interest income for the year ended October 31, 2023 represents $12.0 million of interest earned on money market investments and $3.8 million of interest earned on U.S. Treasury Securities. Interest income earned for the year ended October 31, 2022 reflects interest earned on money market investments.

Gain on extinguishment of finance obligations and debt, net

The gain on extinguishment of finance obligations and debt, net was $15.3 million for the year ended October 31, 2023 and represents the gain on the payoff of the PNC Energy Capital, LLC (“PNC”) finance obligations (which occurred in May 2023), offset by the write-off of debt issuance costs upon the repayment of the loans associated with the Bridgeport Fuel Cell Project and the extinguishment of the PNC sale-leaseback transactions.

Other income, net

Other income, net was $4.7 million and $0.3 million for the years ended October 31, 2023 and 2022, respectively. Other income, net for the year ended October 31, 2023 reflects a gain on the OpCo Financing Facility derivative contract of $3.3 million and $1.9 million of refundable research and development tax credits. Other income, net for the year ended October 31, 2022 primarily represents a gain on derivative contract of $0.8 million, and $0.4 million of refundable research and development tax credits, offset by foreign exchange losses of $0.9 million.

Provision for income taxes

We have not paid federal or state income taxes in several years due to our history of net operating losses, although we have paid foreign income and withholding taxes in South Korea. Provision for income tax recorded for the years ended

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October 31, 2023 and 2022 was $0.6 million and $0.8 million, respectively. The provision for income tax recorded for the years ended October 31, 2023 and 2022 reflects the realization of withholding taxes on customer deposits.

Net loss attributable to noncontrolling interests

Net loss attributable to noncontrolling interests is the result of allocating profits and losses to noncontrolling interests under the hypothetical liquidation at book value (“HLBV”) method. HLBV is a balance sheet-oriented approach for applying the equity method of accounting when there is a complex structure, such as the flip structure of our tax equity financings with East West Bancorp, Inc. (“East West Bank”) and Renewable Energy Investors, LLC (“REI”).

For the year ended October 31, 2023, net income attributable to noncontrolling interest totaled $2.0 million for the LIPA Yaphank project tax equity financing transaction with REI. For the year ended October 31, 2022, net loss allocated to noncontrolling interest totaled $4.5 million for the LIPA Yaphank tax equity financing transaction with REI. The net loss for the year ended October 31, 2022 was primarily driven by the Investment Tax Credit (“ITC”) attributable to the noncontrolling interest for the 2021 tax year. The ITC reduces the noncontrolling interests’ claim on hypothetical liquidation proceeds in the HLBV waterfall. This reduction in liquidation proceeds drove the loss for the year ended October 31, 2022.

For the year ended October 31, 2023, net loss attributable to noncontrolling interest totaled $2.5 million for the Groton Project tax equity financing transaction with East West Bank. There was no comparable net loss for the year ended October 31, 2022, as the Groton Project tax equity transaction closed and the Groton Project began operations in the first quarter of fiscal year 2023. The net loss for the year ended October 31, 2023 is primarily driven by the ITC attributable to the noncontrolling interest for the 2022 tax year. The ITC reduces the noncontrolling interests’ claim on hypothetical liquidation proceeds in the HLBV waterfall. This reduction in liquidation proceeds drove the loss for the year ended October 31, 2023.

Series B preferred stock dividends

Dividends recorded on our 5% Series B Cumulative Convertible Perpetual Preferred Stock (“Series B Preferred Stock”) were $3.2 million for each of the years ended October 31, 2023 and 2022.

Net loss attributable to common stockholders and loss per common share

Net loss attributable to common stockholders represents the net loss for the period less the preferred stock dividends on the Series B Preferred Stock. For the years ended October 31, 2023 and 2022, net loss attributable to common stockholders was $110.8 million and $145.9 million, respectively, and loss per common share was $0.26 and $0.38, respectively. The decrease in the net loss attributable to common stockholders for the year ended October 31, 2023 is primarily due to the lower gross loss for the year ended October 31, 2023 compared to the year ended October 31, 2022. The lower net loss per common share for the year ended October 31, 2023 as compared to the year ended October 31, 2022 is primarily due to the lower net loss attributable to common stockholders and the higher number of weighted average shares outstanding due to share issuances since October 31, 2022.

LIQUIDITY AND CAPITAL RESOURCES

Overview, Cash Position, Sources and Uses

Our principal sources of cash have been proceeds from the sale of our products and projects, electricity generation revenues, research and development and service agreements with third parties, sales of our common stock through public equity offerings, and proceeds from debt, project financing and tax monetization transactions. We have utilized this cash to accelerate the commercialization of our solid oxide platforms, develop new capabilities to separate and capture carbon, develop and construct project assets, invest in capital improvements and expansion of our operations, perform research and development, pay down existing outstanding indebtedness, and meet our other cash and liquidity needs.

As of October 31, 2023, unrestricted cash and cash equivalents totaled $250.0 million compared to $458.1 million as of October 31, 2022. During the year ended October 31, 2023, the Company invested in United States (U.S.) Treasury Securities. The amortized cost of the U.S. Treasury Securities outstanding totaled $103.8 million as of October 31, 2023

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(compared to $0 as of October 31, 2022) and is classified as Investments – short-term on the Consolidated Balance Sheets. The maturity dates for the outstanding U.S. Treasury Securities range from November 9, 2023 to January 23, 2024.

On July 12, 2022, the Company entered into an Open Market Sale Agreement with Jefferies LLC, B. Riley Securities, Inc., Barclays Capital Inc., BMO Capital Markets Corp., BofA Securities, Inc., Canaccord Genuity LLC, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Loop Capital Markets LLC (the “Open Market Sale Agreement”) with respect to an at the market offering program under which the Company may, from time to time and subject to various conditions contained therein, offer and sell up to 95.0 million shares of the Company’s common stock. From the date of the Open Market Sale Agreement through October 31, 2023, the Company sold approximately 62.8 million shares under the Open Market Sale Agreement at an average sale price of $2.66 per share, resulting in gross proceeds of approximately $166.8 million before deducting sales commissions and fees, and net proceeds to the Company of approximately $162.7 million after deducting sales commissions and fees totaling approximately $4.1 million. During the year ended October 31, 2023, approximately 44.3 million shares were sold under the Open Market Sale Agreement at an average sale price of $2.25 per share, resulting in gross proceeds of approximately $99.7 million before deducting sales commissions and fees, and net proceeds to the Company of approximately $97.4 million after deducting sales commissions and fees totaling approximately $2.3 million. During the three months ended October 31, 2023, approximately 2.0 million shares were sold under the Open Market Sale Agreement at an average sale price of $2.14 per share, resulting in gross proceeds of approximately $4.3 million before deducting sales commissions and fees, and net proceeds to the Company of approximately $4.2 million after deducting sales commissions and fees totaling approximately $0.1 million. As of October 31, 2023, approximately 32.2 million shares were available for issuance under the Open Market Sale Agreement. However, in order to sell additional shares under the Open Market Sale Agreement, the Company must file a prospectus supplement covering such sales under its recently filed Registration Statement on Form S-3. The Company currently intends to use the net proceeds from any additional sales under the Open Market Sale Agreement to accelerate the development and commercialization of its product platforms (including, but not limited to, its solid oxide and carbon capture platforms), for project development, market development, and internal research and development, to invest in capacity expansion for solid oxide and carbonate fuel cell manufacturing, and for project financing, working capital support, and general corporate purposes. The Company may also use the net proceeds from this offering to invest in joint ventures, acquisitions, and strategic growth investments and to acquire, license or invest in products, technologies or businesses that complement its business.

During the third quarter of fiscal year 2023, the Company (through one of its indirect subsidiaries) entered into a project financing facility (which is referred to as the “OpCo Financing Facility”) in the amount of $80.5 million, which was partially used to extinguish certain existing debt, to partially repay other existing debt, and to repurchase project assets under sale-leaseback transactions, resulting in $46.1 million of net proceeds. See Note 11. “Debt” for additional information regarding the OpCo Financing Facility.

During the fourth quarter of fiscal year 2023, the Company (through one of its indirect subsidiaries) entered into two related term loan facilities (which are referred to herein as the “Senior Back Leverage Loan Facility” and the “Subordinated Back Leverage Loan Facility”) in the aggregate amount of $20.0 million. See Note 11. “Debt” for additional information regarding the Senior Back Leverage Loan Facility and the Subordinated Back Leverage Loan Facility.

During the fourth quarter of fiscal year 2023, the Company closed on a tax equity financing transaction with Franklin Park 2023 FCE Tax Equity Fund, LLC (“Franklin Park”), a subsidiary of Franklin Park Infrastructure, LLC, for two fuel cell power plant installations -- the 14.0 MW Derby Fuel Cell Project and the 2.8 MW SCEF Fuel Cell Project, both located in Derby, Connecticut (collectively, the “Derby Projects”). Franklin Park’s tax equity commitment with respect to the Derby Projects totals $30.2 million. Of this amount, approximately $9.1 million was received on October 31, 2023. In connection with the closing of this tax equity financing transaction, the Company paid closing costs of approximately $1.8 million, which included appraisal fees, title insurance expenses and legal and consulting fees. The balance of this commitment will be funded to the Company upon substantial completion of the Derby Projects. Net of estimated additional fees of $0.5 million, the Company anticipates additional funding of approximately $20.6 million.

We believe that our unrestricted cash and cash equivalents, expected receipts from our contracted backlog, funds received upon the maturity of U.S. Treasury Securities, and release of short-term restricted cash less expected disbursements over the next twelve months will be sufficient to allow the Company to meet its obligations for at least one year from the date of issuance of the financial statements included in this Annual Report on Form 10-K.

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To date, we have not achieved profitable operations or sustained positive cash flow from operations. The Company’s future liquidity, for fiscal year 2024 and in the long-term, will depend on its ability to (i) timely complete current projects in process within budget, (ii) increase cash flows from its generation operating portfolio, including by meeting conditions required to timely commence operation of new projects, operating its generation operating portfolio in compliance with minimum performance guarantees and operating its generation operating portfolio in accordance with revenue expectations, (iii) obtain financing for project construction and manufacturing expansion, (iv) obtain permanent financing for its projects once constructed, (v) increase order and contract volumes, which would lead to additional product sales, service agreements and generation revenues, (vi) obtain funding for and receive payment for research and development under current and future Advanced Technologies contracts, (vii) successfully commercialize its solid oxide, hydrogen and carbon capture platforms, (viii) implement capacity expansion for solid oxide product manufacturing, (ix) implement the product cost reductions necessary to achieve profitable operations, (x) manage working capital and the Company’s unrestricted cash balance and (xi) access the capital markets to raise funds through the sale of debt and equity securities, convertible notes, and other equity-linked instruments.

We are continually assessing different means by which to accelerate the Company’s growth, enter new markets, commercialize new products, and enable capacity expansion. Therefore, from time to time, the Company may consider and enter into agreements for one or more of the following: negotiated financial transactions, minority investments, collaborative ventures, technology sharing, transfer or other technology license arrangements, joint ventures, partnerships, acquisitions or other business transactions for the purpose(s) of geographic or manufacturing expansion and/or new product or technology development and commercialization, including hydrogen production through our carbonate and solid oxide platforms and storage and carbon capture, sequestration and utilization technologies.

Our business model requires substantial outside financing arrangements and satisfaction of the conditions of such arrangements to construct and deploy our projects to facilitate the growth of our business. The Company has invested capital raised from sales of its common stock to build out its project portfolio. The Company has also utilized and expects to continue to utilize a combination of long-term debt and tax equity financing (e.g., sale-leaseback transactions, partnership flip transactions and the monetization and/or transfer of eligible investment and production tax credits) to finance its project asset portfolio as these projects commence commercial operations, particularly in light of the passage of the Inflation Reduction Act in August 2022. The Company may also seek to undertake private placements of debt securities to finance its project asset portfolio. The proceeds of any such financing, if obtained, may allow the Company to reinvest capital back into the business and to fund other projects. We may also seek to obtain additional financing in both the debt and equity markets in the future. If financing is not available to us on acceptable terms if and when needed, or on terms acceptable to us or our lenders, if we do not satisfy the conditions of our financing arrangements, if we spend more than the financing approved for projects, if project costs exceed an amount that the Company can finance, or if we do not generate sufficient revenues or obtain capital sufficient for our corporate needs, we may be required to reduce or slow planned spending, reduce staffing, sell assets, seek alternative financing and take other measures, any of which could have a material adverse effect on our financial condition and operations.

Generation Operating Portfolio, Project Assets and Backlog

To grow our generation operating portfolio, the Company will invest in developing and building turn-key fuel cell projects, which will be owned by the Company and classified as project assets on the Consolidated Balance Sheets. This strategy requires liquidity and the Company expects to continue to have increasing liquidity requirements as project sizes increase and more projects are added to backlog. We may commence building project assets upon the award of a project or execution of a multi-year PPA with an end-user that has a strong credit profile. Project development and construction cycles, which span the time between securing a PPA and commercial operation of the platform, vary substantially and can take years. As a result of these project cycles and strategic decisions to finance the construction of certain projects, we may need to make significant up-front investments of resources in advance of the receipt of any cash from the sale or long-term financing of such projects. To make these up-front investments, we may use our working capital, seek to raise funds through the sale of equity or debt securities, or seek other financing arrangements. Delays in construction progress and completing current projects in process within budget, or in completing financing or the sale of our projects may impact our liquidity in a material way.

Our generation operating portfolio (43.7 MW as of October 31, 2023, which includes 7.4 MW attributed to the design rated output of the Groton Project, although the Groton Project has been operating below its rated capacity at an output of approximately 6.0 MW since commencement of commercial operations) contributes higher long-term cash flows to the Company than if these projects had been sold. We expect generation revenue to continue to grow as additional projects

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achieve commercial operation, but this revenue amount may also fluctuate from year to year depending on platform output, operational performance and management and site conditions. The Company plans to continue to grow this portfolio while also selling projects to investors. As of October 31, 2023, the Company had projects representing an additional 19.4 MW in various stages of development and construction, which projects are expected to generate operating cash flows in future periods, if completed. Retaining long-term cash flow positive projects, combined with our service fleet, is expected to result in reduced reliance on new project sales to achieve cash flow positive operations, however, operations and performance issues could impact results. We have worked with and are continuing to work with lenders and financial institutions to secure construction financing, long-term debt, tax equity and sale-leasebacks for our project asset portfolio, but there can be no assurance that such financing can be attained, or that, if attained, it will be retained and sufficient.

As of October 31, 2023, net debt outstanding related to project assets was $112.6 million. Future required payments, inclusive of principal and interest, totaled $138.8 million as of October 31, 2023. The outstanding finance obligations under our sale-leaseback transactions, which totaled $18.8 million as October 31, 2023, include an embedded gain of $9.1 million representing the current carrying value of finance obligations less future required payments, which will be recognized at the end of the applicable lease terms should the Company repurchase the assets at the end of the term.

Our generation operating portfolio provides us with the full benefit of future cash flows, net of any debt service requirements.

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The following table summarizes our generation operating portfolio as of October 31, 2023:

Pfizer, Inc. Groton, CT Pfizer, Inc. 5.6 Q4 '16 20

Santa Rita Jail Dublin, CA Alameda County, California 1.4 Q1 '17 20

Groton Project Groton, CT CMEEC (CT Electric Co-op) 7.4 (2) Q1'23 20

Total MW Operating: 43.7

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The following table summarizes projects in process, all of which are in backlog, as of October 31, 2023:

Project Name Location Power Off-Taker RatedCapacity(MW) (1) PPATerm(Years)

Toyota Los Angeles, CA Southern California Edison; Toyota 2.3 20

CT RFP-2 Derby, CT Eversource/United Illuminating (CT Utilities) 14.0 20

Trinity College Hartford, CT Trinity College 0.3 15

Total MW in Process: 19.4

The projects listed in the above table are in various stages of development or on-site construction and installation. Current project updates are as follows:

In addition, the commissioning of a 2.8 MW project also located in Derby, CT is in the final stages. Our current expectation is that this project will be placed in service in December 2023.

Backlog by revenue category is as follows:

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Overall, backlog decreased by approximately 5.7% to $1.03 billion as of October 31, 2023, compared to $1.09 billion as of October 31, 2022, primarily as a result of revenue recognition under product, generation and service agreements since October 31, 2022. This decline in backlog was partially offset by new service agreements backlog as a result of the new service agreement with Noeul Green Energy entered into during the year ended October 31, 2023.

Backlog represents definitive agreements executed by the Company and our customers. Projects for which we have an executed PPA are included in generation backlog, which represents future revenue under long-term PPAs. The Company’s ability to recognize revenue in the future under a PPA is subject to the Company’s completion of construction of the project covered by such PPA. Should the Company not complete the construction of the project covered by a PPA, it will forgo future revenues with respect to the project and may incur penalties and/or impairment charges related to the project. Projects sold to customers (and not retained by the Company) are included in product sales and service agreements backlog, and the related generation backlog is removed upon sale. Together, the service and generation portion of backlog had a weighted average term of approximately 17 years, with weighting based on the dollar amount of backlog and utility service contracts of up to 20 years in duration at inception.

Factors that may impact our liquidity

Factors that may impact our liquidity in fiscal year 2024 and beyond include:

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There are currently three projects with fuel sourcing risk, which are the Toyota project, which requires procurement of RNG, and our Derby, CT 14.0 MW and 2.8 MW projects, both of which require natural gas for which there is no pass-through mechanism. A two-year (through May of 2025) fuel supply contract has been executed for the Toyota project. Six-year (through October 2029) fuel supply contracts have been executed for the 14.0 MW and 2.8 MW projects in Derby, CT. The Company will look to extend the duration of these contracts should market and credit conditions allow. If the Company is unable to secure fuel on favorable economic terms, it may result in impairment charges to the Derby project assets and further charges for the Toyota project asset.

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Included in projected expenditures associated with the capacity expansion for molten carbonate is equipment to launch the carbon capture platform manufacturing required for the assembly of the technology jointly developed with EMTEC. The solid oxide production capacity expansion is underway in our Calgary, Canada facility and is expected to increase the capacity of the facility from 1 MW to 10 MW per year of solid oxide fuel cell production or from 4 MW to 40 MW per year of solid oxide electrolysis cell (“SOEC”) production in fiscal year 2024.

We have made progress in advancing our carbonate and solid oxide platform capacity expansion plans.

Carbonate Platform:At this time, the maximum annualized capacity (module manufacturing, final assembly, testing and conditioning) is 100 MW per year under the Torrington facility’s current configuration when fully utilized. The Torrington facility is sized to accommodate the eventual annualized production capacity of up to 200 MW per year with additional capital investment in machinery, equipment, tooling, labor and inventory.

The Company continues to invest in capability with the goal of reducing production bottlenecks and driving productivity, including investments in automation, laser welding, and the construction of additional integrated conditioning capacity. The Company also constructed a SureSource 1500 in Torrington during fiscal year 2022, which operates as a testing facility for qualifying new supplier components and performance testing and validation of continued platform innovations. During fiscal year 2023, the Company made investments to add engineered carbon separation capability to the onsite SureSource 1500. This addition is expected to be completed in fiscal year 2024. This product enhancement will allow potential customers to observe the operating plant and, given the targeted market of food and beverage companies, will allow for the sampling and testing of separated CO2 to verify quantity, quality or purity requirements.

Solid Oxide Platforms: The Company continues to invest in product development and manufacturing scale up for two solid oxide platforms: power generation and electrolysis. Both platforms are based on the Company’s differentiated thin, lightweight, electrode supported cells, which are configured into compact, lightweight stacks. The thin electrode structure minimizes electrolyte materials, leading to very low use of rare earth minerals compared to other solid oxide technologies, and the electrodes do not require the platinum group materials that lower temperature systems require. The thin electrodes also have very low electrical resistance, leading to high efficiency in both power generation and electrolysis applications. We provide integrated products with the goal of offering complete customer solutions. Our electrolysis platform includes integrated steam generation and hydrogen drying systems, so it will be fed with water, not steam, and will provide dried hydrogen. A steam supply can optionally be used to increase the electrical efficiency of the system from 90% to 100% (based on higher heating value). Our power generation platform can operate on natural gas, biogas, hydrogen, or fuel blends, and is capable of combined heat and power operation at up to 80% efficiency (based on lower heating value).

During the year ended October 31, 2023, Versa Power Systems Ltd. (“Versa Ltd.”), a subsidiary of FuelCell Energy, entered into a lease expansion, extension and amending agreement which expanded the space leased by Versa Ltd. in Calgary, Alberta, Canada to include an additional approximately 48,000 square feet, for a total of approximately 80,000 square feet of space. The Company took possession of part of the additional space on April 1, 2023 and took possession of the rest of the additional space on June 1, 2023 after certain leasehold improvements were made to support increased manufacturing. In addition, long-lead process equipment has been ordered to facilitate the expansion of manufacturing capacity for the solid oxide platforms in Calgary. Upon the completion of the Calgary capacity expansion, the Company expects that it will be able to increase annual production capacity and that it will be capable of delivering up to 40 MW of annualized SOEC production per year. During the engineering and permitting phase of this initial manufacturing expansion project, the Company has designed in flexibility that would allow us to further increase cell stack manufacturing capacity at our Calgary facility to facilitate the potential annualized production of up to an additional 40 MW of SOECs per year by leasing additional space and investing in various process optimizations intended to increase throughput and yield. This approach would allow for the potential to increase our total annualized SOEC manufacturing capacity to up to 80 MW per year. Additional investments in our Torrington, CT manufacturing facility could also be undertaken to provide solid oxide module assembly to further enhance overall SOEC manufacturing capacity. The Company has hired and trained additional staff for a 3-shift production operation to support the initial planned expansion to 40 MW

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and would need to add additional staff as required in the future to realize the potential 80 MW of annualized SOEC production.

Our solid oxide manufacturing operation is in the process of building four units: two units that will run internally for advanced testing and two production units for delivery externally. Of these commercial units for external delivery, one will be our electrolysis platform for delivery to Idaho National Laboratory (“INL”), and the other will be our distributed power platform for delivery to Trinity College in Hartford, Connecticut for use under a long-term power purchase agreement. All four of these units are in the design, fabrication or manufacturing process, with the INL unit in the final stages of construction and testing. We expect to deliver this unit to INL in early 2024. The other three units are expected to be completed and delivered during calendar year 2024 depending on timing of site readiness, permitting and key component deliveries. If needed to accommodate future commercial orders, the Company may reallocate one or more of its planned internal units for commercial delivery.

The expansion of the Calgary manufacturing facility is phase 1 of the Company’s planned operational expansion of production capability. While this expansion is expected to increase our production capacity from 4 MW per year to 40 MW per year of SOECs, the Company also plans to add an additional 400 MW of solid oxide manufacturing capacity in the United States. Early facility design and engineering requirements have been developed, and the Company has engaged in an extensive search in the United States for a potential location for a new manufacturing facility, which would be incremental to the Calgary facility. We anticipate announcing more details regarding our plans for solid oxide production expansion into the United States later in the near term.

Lastly, the Company is in the process of examining or actively applying for various financial programs offered by both Canada and the United States to provide subsidies, investment tax credits and other assistance with the goal of expanding capacity for clean energy manufacturing.

Depreciation and Amortization

As the Company builds project assets and makes capital expenditures, depreciation and amortization expenses are expected to increase. For the years ended October 31, 2023 and 2022, depreciation and amortization totaled $25.4 million and $21.3 million, respectively (of these totals, approximately $20.3 million and $15.5 million for the years ended October 31, 2023 and 2022, respectively, relate to depreciation of project assets in our generation operating portfolio and amortization of a generation intangible asset).

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Cash Flows

Cash and cash equivalents and restricted cash and cash equivalents totaled $299.6 million as of October 31, 2023 compared to $481.0 million as of October 31, 2022. As of October 31, 2023, unrestricted cash and cash equivalents was $250.0 million compared to $458.1 million of unrestricted cash and cash equivalents as of October 31, 2022. As of October 31, 2023, restricted cash and cash equivalents was $49.6 million, of which $5.2 million was classified as current and $44.5 million was classified as non-current, compared to $23.0 million of restricted cash and cash equivalents as of October 31, 2022, of which $4.4 million was classified as current and $18.6 million was classified as non-current.

The following table summarizes our consolidated cash flows:

Year Ended October 31,

Consolidated Cash Flow Data:

Effects on cash from changes in foreign currency rates 80 (933) (80)

The key components of our cash inflows and outflows were as follows:

Operating Activities – Net cash used in operating activities was $140.3 million during fiscal year 2023, compared to net cash used in operating activities of $112.2 million in fiscal year 2022 and net cash used in operating activities of $70.4 million in fiscal year 2021.

Net cash used in operating activities during fiscal year 2023 was primarily a result of the net loss of $108.1 million, increases in unbilled receivables of $21.9 million and other assets of $13.1 million and decreases in deferred revenue of $22.3 million and accrued liabilities of $4.5 million, partially offset by decreases in inventories of $4.7 million and accounts receivable of $1.1 million, an increase in accounts payable of $3.0 million and non-cash adjustments of $22.0 million.

Net cash used in operating activities during fiscal year 2022 was primarily a result of the net loss of $147.2 million, increases in inventories of $28.1 million, other assets of $2.1 million and unbilled receivables of $0.2 million and a decrease in deferred revenue of $11.3 million, partially offset by decreases in accounts receivable of $9.2 million, increases in accrued liabilities of $24.6 million and accounts payable of $6.3 million, non-cash adjustments of $35.0 million and cash adjustments of $1.6 million.

Net cash used in operating activities during fiscal year 2021 was primarily the result of the net loss of $101.1 million, increases in accounts receivable of $5.2 million, unbilled receivables of $3.6 million and inventory of $18.8 million and decreases in deferred revenue of $5.2 million. These amounts were partially offset by increases in accounts payable of $2.0 million and accrued liabilities of $0.3 million and net non-cash adjustments of $63.8 million.

Investing Activities – Net cash used in investing activities was $192.4 million during fiscal year 2023, compared to $46.7 million in fiscal year 2022 and $73.2 million in fiscal year 2021.

Net cash used in investing activities during fiscal year 2023 included $299.1 million for the purchase of U.S. Treasury Securities, $53.0 million of project asset expenditures and $39.4 million of capital expenditures, offset by funds received from the maturity of U.S. Treasury Securities of $199.1 million.

Net cash used in investing activities during fiscal year 2022 included $25.6 million of project asset expenditures and $21.1 million of capital expenditures.

Net cash used in investing activities during fiscal year 2021 included $66.9 million of project asset expenditures and $6.4 million of capital expenditures.

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Financing Activities – Net cash provided by financing activities was $151.1 million during fiscal year 2023, compared to $180.6 million in fiscal year 2022 and $411.9 million in fiscal year 2021.

Net cash provided by financing activities during fiscal year 2023 resulted from $100.5 million of proceeds from debt financings, $97.4 million of net proceeds from sales of common stock and $9.1 million of contributions received from the sale of a noncontrolling interest, offset by debt repayments of $47.8 million, payments of debt issuance costs of $3.5 million, payments for taxes related to net share settlement of equity awards of $0.9 million, payment of $3.2 million in preferred dividends to the holders of our Series B Preferred Stock and distribution to noncontrolling interests of $0.6 million.

Net cash provided by financing activities during fiscal year 2022 resulted from $183.6 million of net proceeds from sales of common stock and $11.9 million of net contributions received from the sale of a noncontrolling interest in the LIPA Yaphank Project, partially offset by debt repayments of $9.5 million, payment for taxes related to net share settlement of equity awards of $1.9 million, payment of $3.2 million of preferred dividends to the holders of our Series B Preferred Stock and distribution to noncontrolling interest of $0.3 million.

Net cash provided by financing activities during fiscal year 2021 resulted from $525.9 million of proceeds from common stock sales, net of fees and expenses, $10.2 million of proceeds from the sale-leaseback transaction with Crestmark Equipment Finance, a $3.0 million contribution received from a noncontrolling interest, and $0.9 million of proceeds received from warrant exercises, offset by debt repayments of $98.6 million primarily relating to the payoff of amounts owed under the Orion Credit Agreement and the PPP Note (in each case, as defined elsewhere herein), a prepayment penalty of $4.0 million for the early payoff of the debt outstanding under the Orion Credit Agreement, payment of preferred dividends of $3.2 million under the terms of the Series B Preferred Stock, payment of $21.5 million to repay all remaining obligations under the terms of the Series 1 Preferred Shares previously issued by one of the Company’s indirect subsidiaries and the payment of deferred financing costs of $0.4 million.

Commitments and Significant Contractual Obligations

The following table provides a summary of our significant future commitments and contractual obligations as of October 31, 2023 and the related payments by fiscal year:

Payments Due by Period

Series B Preferred dividends payable (5) — — — — —

(2) Future minimum lease payments on finance and operating leases.

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Outstanding Loans as of October 31, 2023

A discussion of the key terms and conditions of the loans outstanding as of October 31, 2023 is included in Note 11. “Debt” to the consolidated financial statements and is incorporated by reference herein. The information included under the headings “OpCo Financing Facility,” “Back-Leverage Financing,” “State of Connecticut Loan,” and “Finance obligations for sale-leaseback agreements” in Note 11. “Debt” to the consolidated financial statements is incorporated herein by reference.

Restricted Cash

As of October 31, 2023, we have pledged approximately $49.6 million of our cash and cash equivalents as performance security and for letters of credit for certain banking requirements and contracts. As of October 31, 2023, outstanding letters of credit totaled $14.2 million. These expire on various dates through October 2029. Under the terms of certain contracts, we will provide performance security for future contractual obligations. The restricted cash balance as of October 31, 2023 also included $2.9 million primarily to support obligations under the power purchase and service agreements related to Crestmark sale-leaseback transactions, $9.3 million relating to future obligations associated with the Senior Back Leverage Loan Facility and the Subordinated Back Leverage Loan Facility and $19.7 million relating to future obligations associated with the OpCo Financing Facility. Refer to Note 11. “Debt” to our Consolidated Financial Statements for the year ended October 31, 2023 included in this Annual Report on Form 10-Kfor a more detailed discussion of the Company’s restricted cash balance.

Power purchase agreements

Under the terms of our PPAs, customers agree to purchase power or other value streams delivered such as hydrogen, steam, water, and/or carbon from the Company’s fuel cell power platforms at negotiated rates. Electricity rates are generally a function of the customers’ current and estimated future electricity pricing available from the grid. We are responsible for all operating costs necessary to maintain, monitor and repair our fuel cell power platforms. Under certain agreements, we are also responsible for procuring fuel, generally natural gas or biogas, to run our fuel cell power platforms. In addition, under certain agreements, we are required to produce minimum amounts of power under our PPAs and we have the right to terminate PPAs by giving written notice to the customer, subject to certain exit costs. As of October 31, 2023, our generation operating portfolio was 43.7 MW (which includes 7.4 MW attributed to the design rated output of the Groton Project although the Groton Project has been operating below its rated capacity at an output of approximately 6.0 MW since commencement of commercial operations).

Service and warranty agreements

We warranty our products for a specific period of time against manufacturing or performance defects. Our standard U.S. warranty period is generally 15 months after shipment or 12 months after acceptance of the product. In addition to the standard product warranty, we have contracted with certain customers to provide services to ensure the power plants meet minimum operating levels for terms of up to 20 years. Pricing for service contracts is based upon estimates of future costs, which could be materially different from actual expenses. Refer to “Critical Accounting Policies and Estimates” for additional details.

Advanced Technologies contracts

We have contracted with various government agencies and certain companies from private industry to conduct research and development as either a prime contractor or sub-contractor under multi-year, cost-reimbursement and/or cost-share type contracts or cooperative agreements. Cost-share terms require that participating contractors share the total cost of the project based on an agreed upon ratio. In many cases, we are reimbursed only a portion of the costs incurred or to be incurred on the contract. While government research and development contracts may extend for many years, funding is often provided incrementally on a year-by-year basis if contract terms are met and Congress authorizes the funds. As of October 31, 2023, Advanced Technologies contract backlog totaled $15.3 million, of which $10.7 million is non-U.S. Government-funded, $4.3 million is U.S. Government-funded and $0.3 million is U.S. Government-unfunded.

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Off-Balance Sheet Arrangements

We have no off-balance sheet debt or similar obligations which are not classified as debt. We do not guarantee any third-party debt. See Note 19. “Commitments and Contingencies” to our consolidated financial statements for the year ended October 31, 2023 included in this Annual Report on Form 10-K for further information.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

FCEL US Equity

FCEL · 10-K · period ended 2023-10-31

ITEM 1A.RISK FACTORS

Item 1B.UNRESOLVED STAFF COMMENTS

Item 1C. CYBERSECURITY

Item 2. PROPERTIES

Item 3. LEGAL PROCEEDINGS

Item 4. MINE SAFETY DISCLOSURES

Item 6. RESERVED

FCEL US Equity☆

FCEL · 10-K · period ended 2023-10-31

ITEM 1A.RISK FACTORS

Item 1B.UNRESOLVED STAFF COMMENTS

Item 1C. CYBERSECURITY

Item 2. PROPERTIES

Item 3. LEGAL PROCEEDINGS

Item 4. MINE SAFETY DISCLOSURES

Item 6. RESERVED

FCEL US Equity